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Tuesday, January 06, 2009
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| Big Trouble |
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Martin Wolf, who wrote the book on our current economic troubles, has a thought-provoking and extremely worrying column in the Financial Times. Everyone should read it. Here's the basic argument:
Which might be a problem. Because:
Obama is making the right move by telling the country now that the deficit is going to get a whole lot larger, and that it will have to be like that for a while if we're to avoid serious economic consequences. Thing is, he's already encountering mild resistance to his $775 billion proposal. And that proposal might not be big enough. ![]()
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Wednesday, December 24, 2008
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| Hey, Big Spender |
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Don't miss Martin Feldstein's Wall Street Journal op-ed calling for additional defense spending as part of next year's economic stimulus bill.
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Friday, December 12, 2008
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| Ideas Have Consequences |
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"World Markets Plunge as U.S. Auto Bailout Fails." In other news, the dollar has fallen to a 13-year low against the Yen. Have a great day!
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Thursday, December 11, 2008
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| The Great Sell-Off |
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Jim Lindgren has two interesting ideas on how to reduce the gigantic federal debt. The most interesting: selling off large swaths of federal land to private owners. Individuals would develop the land, and the government would get a new revenue stream. What's not to like?
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Friday, December 05, 2008
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| First the Unemployment Numbers, Now This? |
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Chicago Bears fans are shoveling snow at Lambeau Field for money. That's a bad sign. (H/T Cheesehead.tv) ![]()
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Wednesday, December 03, 2008
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| Sober Thoughts on Bailouts and Their Consequences... |
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From Holman Jenkins in today's Wall Street Journal: Maybe Washington will succeed in forestalling a deep and prolonged recession. Maybe all the money ($8 trillion by one count) being printed to acquire or insure mortgages, student loans, credit card receivables, commercial paper and banking shares will be seamlessly withdrawn once those assets are sold back to willing parties in the private sector when the panic has passed. Maybe taxpayers will even make a profit on the deal. Read it all.
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Tuesday, December 02, 2008
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| Just the Facts, Ma'am |
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The lead story in today's New York Times is headlined, "Recession Began Last December, Economists Say." The story reports that yesterday the National Bureau of Economic Research announced that the U.S. economy has been in recession since December 2007. Then you get to the second paragraph (emphasis mine): "In declaring that the economy has been in a downturn for almost 12 months, the National Bureau of Economic Research confirmed what many Americans had already been feeling in their bones." How does the Times know what many Americans have been "feeling in their bones"? Does Edmund L. Andrews, who wrote the story, also cover orthopedics? And isn't the appropriate saying here that Americans have been feeling recession pains "in their pocketbooks," not their bones? Based on anecdotal evidence, I can report that all that most Americans feel in their bones is the onset of arthritis and maybe a strange tingling right before a thunderstorm.
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Monday, December 01, 2008
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| Paging Saxby Chambliss |
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The National Bureau of Economic Research announced today that the economy has been in recession since December 2007.
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| The Stimulus |
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Robert J. Samuelson on the many economic challenges facing Obama:
Samuelson is right (as usual). But he provoked a raised eyebrow when he mentioned "bruising legislative battles." Two factors - Obama's honeymoon and the decrepit state of the congressional GOP - suggest that there won't be a "legislative battle" over Obama's stimulus plan next year. For the GOP to oppose Obama so early on in his presidency, at a moment of national economic crisis, would further degrade the public's impression of the party. Not that this would stop the GOP, of course.
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| What Do These Two Things Have in Common? |
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In his column today, Paul Krugman notes that trying to budget-balance in the middle of a "liquidity trap" is a bad idea. He gives two examples (emphasis mine):
So, in both cases, government cut spending and prolonged a recession. But that's not all! In both cases, government also raised taxes and prolonged a recession. Funny, Krugman doesn't focus much - doesn't focus at all, in fact - on this part of his evidence. A "liquidity trap," according to Krugman, is a situation in which "the monetary authority had cut interest rates as far as it could, yet the economy was still operating far below capacity." A situation a lot like today, in other words. The chances that the Bush tax cuts remain in place after 2010 just got a little bit higher.
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Saturday, November 22, 2008
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| The Geithner Gallop? |
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Is Tim Geithner, Barack Obama’s choice to succeed Hank Paulson at Treasury, worth 500 points on the Dow? So it seems. No surprise say the professional traders: Markets hate uncertainty, and by making up his mind about this key economic post, Obama has removed a great deal of uncertainty. Plausible, but not persuasive. One thing was certain since the day Barack Obama became our president-elect. Someone would replace Paulson, and that person would implement the Obama agenda. Whether that person turned out to be Paul Volcker, Larry Summers, Timothy Geithner or some reincarnation of Adam Smith, that person would be an implementer of policy. Yes, he--no plausible “she” was ever in the frame--would also be a key adviser to the new president. But would the advice of Larry Summers be very different from that of his long-time buddy, Geithner? Not likely. So where was the uncertainty that was dispelled by the naming of the new secretary of the Treasury? Also, just what uncertainty has been eliminated? We knew no more about Obama’s plans and priorities on Friday afternoon, after the Geithner appointment was announced, than we did that morning. There will be a stimulus package of undetermined amount, there will be a GM bailout containing undetermined conditions, there will some day be an end to the secret ballot in union elections but we have no idea when--all known for some time. No uncertainty eliminated, no certainty substituted for the vagueness that has so far been the Obama hallmark. The real significance of the market pop on the Geithner announcement is that we are shifting, at least for now and for the foreseeable future, from a market-driven economy to a government-policy driven economy. When Hank Paulson announced that he had changed his mind and would not buy the rotten IOUs that litter bank balance sheets, the market tanked. Nothing about the prospect for the economy changed--earnings will be whatever they will be in this recession, so will unemployment and other variables. Only policy changed. So, too, on Friday. The economy was in as bad shape in the afternoon as it was in the morning. But a new policy player was inserted into the game. It didn’t take a genius to understand Paulson when he said that he would put the remaining $350 billion into a lockbox, to be opened by his successor--or sooner, with the blessing of that successor. Nor did it take a genius to figure out that this weekend’s deliberations about what to do about the sinking ship that is Citigroup--some wags are suggesting that CEO Vikram Pandit ask for a bailout by cash-rich Somali pirates who undoubtedly would like to move from their Mafia-like existence to financial respectability as the Corleones did when they shifted to Las Vegas--would now include Geithner as the “decider”, rather than merely as an advisor. In short, policymaking changed on Friday afternoon, and the market likes what it thinks is the new direction more than it likes Paulson’s recent moves. The economy is no different. Obama might have intended to keep his hands off policy until he is inaugurated so as to distance himself from the Bush administration. But the policy-driven economy waits for no man, not even one who claims to be able to cool the planet and turn back the flood waters. We are now in an era in which Washington trumps New York. When the economy is creating wealth, Wall Street and Main Street are the centers of the action; Washington has little or nothing to contribute. When attention shifts to redistributing wealth, the center of the action shifts to Pennsylvania Avenue, Capitol Hill and K Street. That’s where it is now.
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Tuesday, November 18, 2008
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| Man Bites Dog |
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The New York Times editorial page endorses the Colombia Free Trade Agreement.
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Thursday, November 13, 2008
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| Palin to Paulson: "No More Surprises" |
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Miami -- In an interview after her speech at the Republican Governors' Association meetings here today, Alaska Governor Sarah Palin criticized the Bush administration for exacerbating voter "distrust" by shifting money from the $700 billion bailout from buying bad bank assets to purchasing additional stock in banks. In response to the proposed changes, announced yesterday by Treasury Secretary Henry Paulson, Palin expressed frustration on behalf of a weary electorate and offered a stern warning. "No more surprises," she said. "I think the surprises make the electorate distrust elected officials and their ability to appoint people who are to be looking out for the public’s interest." The brief interview took place in a meeting room at the Miami Intercontinental Hotel. I asked her the question today because when Wolf Blitzer asked her a similar question yesterday, she struggled to give him an answer. She initially told him that "there is going to come a point here where absolutely the federal government must play an appropriate role in shoring up some of these industries that are hurting and will ultimately hurt our entire economy and the world's economy if there aren't some better decisions being made." But then she spoke of the need for "personal responsibility" and worried about setting a bad precedent. Blitzer pressed her:
In her speech this morning, Palin alluded to the bailout and voiced her growing concerns about Washington's addiction to, as she put it, "opium" -- O.P.M. - other people's money. During a panel discussion following her speech, TWS editor Bill Kristol lamented the fact that there had not been a serious alternative to the $700 billion bailout and Congressman Mike Pence explained his opposition to the bailout. In her interview with TWS, Palin seemed more skeptical of the a potential bailout of the automakers than she had been yesterday. The exchange with Palin follows. TWS: Where are you on the possible bailout of the automakers?
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