The global market meltdown and the stimulus farce
Update: Bush says he can find “common ground” with Democrats on an economic stimulus. “Common ground” = Watch your wallets.
Update: Bush will meet with members of Congress at 2:40pm Eastern today. USAT reports that the White House is “not ruling out a stimulus package in excess of $150 billion.”
***
It’s the second day of the global market meltdown. The Fed just cut the federal funds rate and the Dow Jones is on a roller-coaster ride this morning:
U.S. stock futures seesawed Tuesday after the Federal Reserve, responding to a growing financial market crisis, slashed interest rates 0.75 percentage point. Dow Jones industrial futures, down more than 500 points, or more than 5%, before the Fed move, were fluctuating violently an hour before the start of trading, but improved to a level where they were down 206, or 1.7%, to 11,900. The Fed move was unsurprising, given that world stock markets were falling precipitously the past two days, and that U.S. stocks had tumbled last week amid growing fears of a recession in the United States. Still, the markets are quite anxious, not sure that even interest rate cuts will lift an economy slammed by an ongoing housing and credit crisis. The Fed’s move came a week before the central bank’s regularly scheduled meeting, a sign that the Fed recognized the seriousness of the world financial situation.
This much is clear: All the grand talk of a multi-billion-dollar “economic stimulus” from self-appointed saviors in both parties is not helping. It hasn’t persuaded reality-based observers here and it hasn’t persuaded markets abroad. Sorry, Hillary, but your five year interest rate freeze and your “Green Collar” jobs initiative ain’t gonna rescue America. Alan Reynolds provides more reality checks to President Bush in the WSJ today–elaborating on points I’ve made here (and many of you have made here in comments and e-mails) over the last several months:
A reporter on Fox News recently asked, “Which presidential candidate is most qualified to turn the economy around and avoid a recession?” The quick answer is: none.
No candidate will become president soon enough to matter, and to ask the question is to presume that recessions can and should be avoided. But some business mistakes require time to be fixed. Too many houses were built in some areas, so prices have to fall to discourage more building and encourage more buying. Some banks made too many bad loans, so they need to become more cautious. Besides, if presidents really knew how to avoid recessions, why do we keep having them?
Nonetheless, President George W. Bush is now joining the election-year rush to “give the economy a shot in the arm.” A shot of debt, that is.
All proposals for fiscal stimulus claim to “jump-start” the economy by having the government borrow money from Smith and give it to Jones. Unfortunately, Smith is paid interest on that IOU, which implies a higher tax burden on somebody. That future taxpayer is, as usual, the forgotten man. All the attention is instead focused on Jones — trying to get the Jones family to spend more on what Mr. Bush alluded to as “basic necessities.”
As for the drive in Washington to encourage people in debt to spend, spend, spend more, Reynolds debunks the gimmickry:
Mr. Bush put great emphasis on boosting consumer and business spending “this year.” Any such temporary boost is likely to shift the timing of such purchases forward — at the expense of next year.
Economists use the phrase “political business cycle” to describe the abuse of opportunistic fiscal gimmicks (usually transfer payments) to provide a temporary boost during presidential election years. The hangover is felt during the year after presidential elections. Recessions thus began in October 1949, July 1953, August 1957, December 1969, November 1973, July 1981, and March 2001.
Alan Auerbach of the University of California at Berkeley surveyed the effectiveness of U.S. fiscal policy in 2002, concluding that “discretionary policy has had a weak overall effect on output” and that there is “little evidence these effects have provided a significant contribution to economic stabilization, if in fact they have worked in the right direction at all.”
That conclusion became slightly more controversial after the 2001 tax rebate, which turned out to be well-timed as a matter of luck. But the 2001 rebate, unlike today’s proposals, was not temporary. It was an advance on tax refunds resulting from the reduction of the lowest tax rate to 10% from 15% on the first few thousand of taxable income — a reduction which still cuts every taxpaying couple’s tax bill by $600. We can’t conclude that temporary rebates will “work” (temporarily boost sales of consumer staples) on the basis of evidence from a tax cut that was not temporary. And we can’t conclude that rebates confined to those with modest incomes will work on the basis of a tax cut that was granted equally to every taxpayer — including the top 20% who account for 40% of total consumption.
Alas, lack of evidence of their efficacy has never stopped politicians from foisting bad ideas on the nation before.
***
At 10am this morning, the Senate Finance Committee holds a hearing titled “Strengthening America’s Economy: Stimulus That Makes Sense.” CBO director Peter Orszag is scheduled to testify.
***
The Examiner editorializes against boondoggle stimulus fairy tales:
If somebody grabbed your wallet and then handed you back a $20 bill, would you be grateful? Realizing the money was yours to begin with, you would probably call the cops rather than thank the thief.
President Bush’s latest gimmick to stimulate the economy by giving back to taxpayers $800 of their own money is the Washington equivalent of the “generous” thief. The biggest fairy tale in Washington isn’t Barack Obama’s voting record on the war in Iraq, but the notion peddled by Republicans and Democrats alike that the government has a big pot of its own money that it generously gives to people by “injecting” it into the economy as a stimulus.
In fact, government has only our money or money it borrows from lenders. The problem is it costs the government a major portion of every dollar it takes from us in collecting it and paying the interest on dollars it borrows. Why not just let us keep our money in the first place?
…For a real economic stimulus, look no further than the Bush 2003 tax cuts, which lowered the tax rate on capital gains and offered businesses other incentives to invest and hire more workers. Derided in the media as a “tax cut for the rich,” the 2003 tax cuts’ positive results were felt throughout the U.S. economy…
…The proper response to a major economic slowdown is to slash government spending and make those tax cuts permanent. That will keep far more money circulating in the productive sectors of the economy and reward savings and investment, the two pillars of new job creation.
Then, as economic growth regains vigor, politicians should stay out of the way as the market makes painful but necessary corrections that reward the prudent and punish the profligate, including those responsible for the subprime mortgage meltdown.
More on stimulus stupidity from Chris Edwards in the NYPost:
Bush says the stimulus package will “create jobs” – half a million of them, claims Treasury Secretary Henry Paulson. Yet if it were so easy to create jobs by government fiat, why wouldn’t they do it every year?
Bush and Paulson are in a sense saying that they have solved all the problems of the business cycle, which is ludicrous. Just borrow money and mail checks whenever the economy slows – we’ll never have a recession again!
The first problem with this theory: People aren’t that stupid. The idea is that, if Washington gives people money to increase their consumption, it will prompt businesses to expand their production and hire more workers. Thing is, while producers might notice an upward blip in sales after the rebate checks go out, they’ll know it’s temporary – with sales destined to fall back once the checks are spent.
Businesses just don’t hire more employees or build new factories in response to temporary blips in demand.
So the effect would be like that of the government dropping $150 billion in newly minted dollar bills from helicopters all over the country: Producers wouldn’t increase production, so we’d just have more dollars chasing the same amount of goods. That’s the recipe for higher inflation.
Another problem: Just what might American families spend their rebates on? Probably a lot of children’s toys from China, clothes from Latin America and oil from the Middle East. How much will that help the US economy?
Then there’s the question of where Washington will get the $150 billion for the stimulus. It has to borrow it – ironically, much of it probably from countries like China. So, to a significant extent, foreign creditors will lend us the money to send rebates to families, who’ll go out and buy more foreign goods.
The moral element is problematic, too. Washington is already running large budget deficits; a stimulus plan would impose another $150 billion in debt on the next generation. Politicians are always criticizing corporations for being too focused on the short-term, but they have even worse myopia.
***
Ed Morrissey spotlights an argument from Suck It Up analysts that I agree with:
This crisis started with a credit meltdown that came from poor loan decisions made when credit was cheap. Rather than lowering the price of credit as the Fed dramatically did here, analysts have argued that tightening credit and liquidity would be the better long-term strategy to resolve the actual problem, rather than addressing the symptoms.
That kind of strategy would force the country — and the globe — to suffer a recession as a corrective. That might be an effective economic strategy, but not a political strategy. In an election year, no one in either party wants to explain why they think a recession would be good for the soul.
Yes, God forbid politicians advocate that borrowers and lenders face the consequences of their actions…
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The market opens in about 10 minutes. How far will it drop? 500? 1000 points? Place your bets everyone!!
Perhaps, but I don’t think it’s a bad idea for Congress to be “scared” into realizing that the best way to strengthen the economy is for taxpayers to have more of their own money, not the government. Why not look at the glass half-full and use it as a starting point to a full blown tax reduction strategy?
As Cuba Gooding says:
“SHOW ME THE MONEY!!”
Oh wait…the Government is broke and in debt, I guess they have no money…much like me.
I know… let’s raise taxes like they did in Michigan…that seemed to work….NOT!
Yep…..
Here is my economic stimulus plan.
A flat tax of 25 percent on all income above 50,000 dollars.
It simple easy and would increase tax revunes lower the tax burden and would gut the irs.
So by dropping the interest rate, we protect the markets? I’d rather protect the value of the dollar, which is now below that of the Canadian dollar. An interest rate cut only furthers that decline.
The economy doesn’t work on the present; it’s based on the future. We’re all expecting a major tax increase in 2010 and unless Congress takes action to prevent that from happening, no stimulus plan will work.
Democrats do all the time. We have seven new taxes this year in Fairfax County, VA, and the Boston born and raised County chairman “Geraldo” Connolly was boasting that we no longer have to pay for county stickers on the car (a savings of $20).
It probably would be Mitt Romney, who can campaign that he was a successful business and not a career politician.
By the way, doesn’t a permanent tax cut always stimulate the economy? Why is no one in Washington talking about that?
Yep…..
Boomhauer 4 President
Seems like there is a recession in the last year of each presidency.
Cut taxes now!
The great thing about this is that no Democrat in their right mind can talk about raising taxes right now (political suicide).
I wouldn’t expect anything more from our politicians than fiddling with band-aid solutions when they are caught between the rock of their finance industry campaign donors and the hard place of the electorate. We may be stuck with waiting out the corrections of the market itself, but this is the pound of cure that could and should have been prevented by an ounce of foresight from the economic advisers, the Fed, the Commerce and Treasury Departments on which we lavish our tax dollars hoping they would blow the whistle on the tricks and gimmicks that have led to this predicament.
The MSM has convinced a lot of Americans that a weak dollar is bad for the economy; it is actually the opposite–a weak dollar is GOOD for the economy because it boosts exports and encourages foreigners to visit the U.S. and spend their money here. That is why the French president was begging President Bush to strengthen the dollar when he was visiting Washington.
The only way this country will EVER get out of the economic mess it is in, is to lose the socialist income tax. Cutting taxes (like Ireland) will do wonders because businesses will feel secure in growing. And the more business grows, the better it is for workers.
On the other hand, it is the income tax that causes these problems. Exemptions, regulations, write-off, havens, etc., are causing a loss of tax revenue. Having an income tax also makes it easy for the gov’t to raise and lower the rates when they want.
Read the FairTax book. A consumption tax is the only way to go. NO ONE would escape the tax; you buy something new, you pay the tax. Period. This isn’t the place to go into a long-winded explanation of the FairTax. The best way to say it is, why have a socialist taxing structure if you don’t want socialism?
Politicians, can’t stand any of em…
May God help us all!
Amen, Michelle. I think that your advice for the subprime crisis applies very well here, too: suck it up! The alternative here would seem to be that our politicians are really going to screw it up.
As much as I understand the motivation, I do not understand why the Fed cut the rates so drastically. We’ve just gotten inflation numbers that the MSM pounded into everyone as being the worst in 27 years. The Fed must have found some way of making 2+2=7.
As of 9:35am EST, the Dow is down 441.63
The crash of 2008 and the depression of 2009 has begun!
Why is it when the Government writes checks it can’t cover – it’s “defecate spending. Yet for me, it’s call bouncing a check?
SUCK IT UP
Cuts in govt spending and programs would make for great economic stimulus.
BTW, I’m going to spend my $800 loan from China on Chinese products! /sarcasm
Consumption tax will never work because it effectively raises taxes on the poor, and no politician is cold-hearted enough to do that. (In reality, if you’re paying 0% in taxes, anything is an increase.) It’s like abolishing the Dept. of Education. It’s an over-bloated Federal bureaucracy that has no bearing on education at all and wastes $400 billion a year, but to suggest its abolition is to appear “anti-education”. It may be a common-sense move, but rarely does common sense impact the political world.
The best income tax system would move towards a flat tax of 17% of income for payers $30000 and above and include deductions for child care & housing interest, and that’s it. Then you could eliminate 2/3 of the IRS and put 1/3 of those accountants as overseers to make sure Federal programs stay on budget.
In the meantime, cut all Federal funding (not spending– FUNDING) across the board by 10% and start applying that money towards the $10 Trillion National Debt until it’s paid off. If you pay $400 billion to the debt each year, it would be reduced by $3.2 trillion (or more) after 8 years of presidency.
Gloom and doom…
The economy will take care of itself if the politicians and media will just shut up and get out of the way. Politicians can stop unnecessary spending. The media needs a recession to prop up the Democrat candidate for November. They’re both just making it worse.
I agree with the WSJ’s assessment…How many new houses, apartments and strip malls do we need anyway? Sooner or later supply had to outstrip demand.
As much as I don’t believe in the re-distribution of wealth, maybe we can start by reducing spending and increasing tax on billionaires. Soros would be a good start.
Step back for a second a look at the scale of the proposed stimulus in the context of a seven trillion dollar GDP. The stimulus is about two percent of total GDP. A mild recession is one where GDP declines by one percent. Hence, the cost of the stimulus is likely to be more than the cost of the recession.
Moreover, the stimulus does not really address the root cause of the recession – the dependence upon the cabal of despotisms which controls the world’s petroleum supplies. Regime changes and development of alternate supply sources should be discussed by every serious POTUS candidate. However, no one wants to touch the subject for fear of offending environuts, oily despots, or both.
chsw
Good idea followed by permanent cuts in taxes that people and business can plan on and invest safely.
Let the overextended learn their own lessons, both banks and individuals – not with my money.
Last, but hardly least, let us not put a marxist populist in the WH or Congress.
chsw: with all due respect, oil prices really have had very little to do with this market tumble. Our economy has grown steadily through several years of exorbitant oil prices. If you need someone or something to blame, then blame the people who participated in deals in which people believed they could get something for nothing, namely these ridiculous adjustable rate mortgages for people with shaky credit. The banks responsible, and those who have invested in them, deserve what they are getting.
If we just suck it up, people will learn a valuable lesson here that responsible finance is the only way to go. We’ll have our recession or maybe even a depression, but we’ll come out of it poised for even greater, more solid growth. If we screw it up, we’ll further the myth that something can be had for nothing.
Yes, that is the scariest scenario. All we know about Obama, for example, is that he is “multicultural” and has a socialist voting record in Congress. Socialists always use economic crises for class warfare.
“It’s the Economy, stupid!
In this high stakes game the house ALWAYS WINS!
The privately owned Federal Reserve drops the prime by .75% which means that the banking and Wall Street owners are still making 3.5% on every dollar.
The greatest hoax every perpetrated on the America citizenry is the Federal Reserve Central bank. Our founding fathers warned against this and yet the crafty swine still got their way.
They can start by removing those 10,000+ pork items they just passed. This country has some of the best economists in the world. Where are they? Why don’t they run for office?
Flutejpl,
First, I wrote about recession while you wrote about a financial market downturn. While these are usually related, they are not the same and can occur independently. Second, the evaporation in securities market values has been larger than the losses thus far in the subprime credit market. Either more losses have yet to be uncovered (a possibility), or the markets are responding to several other scenarios. These should include (a) cost-push inflation as in the 1970’s when the Fed tried to counteract the rise in oil prices with easy money (b) the probability of a Jackass-controlled Congress and Presidency repealing tax cuts and raising rates still more (c) more geopolitical turmoil (d) the cycling through of higher petroleum prices throughout the economy (e) other factors beyond my surmise at this time.
As far as those institutions and individuals responsible for the credit debacle getting what’s due them, I’m all for that. However, they will try to exercise whatever levers of power are available to them to shift the burden onto taxpayers and others.
chsw
See what happens when Politicians get a pay raise…..
AND — They think we’ll like what they’re doing.
Jerk those pay-raises out of their grubby little hands, and tell them to “Stuff that Stimulus Package”, “De-Pork” all the stuff they’ve done recently. Let the banks take their losses like a grownup. Finally make those Bush tax cuts permanent.
Then let the markets adjust as they will.
I DON’T WANT TO SUFFER A RECESSION AS A CORRECTIVE!
I have long believed that the economy isn’t nearly as bad as people think. We still have 5% unemployment, we still have 3.6% GDP growth, and the market is still near all time highs, and the dollar is near all time lows. Those are all still expansionary measures. I worry that all of this stimulus will wind up overheating the economy, which is the worst possible outcome for mortgages, my business. Here is how I assessed the economy.
Also, speaking of the economy. I don’t know if anyone read Paul Krugman’s hit piece on Reagan’s economic policy, however it needs to be debunked. Here is how I debunked it.
Agreed. This current “crises” was created 6 years ago by the Fed. Ole Greenspan, the hero of Wall Street, lowered interest rates so much that Money Market accounts got 1 percent interest. Meanwhile he heated housing so much it sent prices through the roof and put people into houses that can’t make payments. Now surprise, surprise we have a housing generated recession (or depression, since its going to go on for a long time.).
Yes, your savers would be taxed twice. First their income was taxed, then with this “FAIR TAX” their spending of the savings would be taxed. You would be punishing the most responsible people in society. Then what do you think happens to housing when you put a 23 percent tax on the sale of a house? Would you buy a new car with a 23 percent tax on top of the 20 percent state sales tax(assuming they also eliminate the income tax). The “FAIR TAX” is anything but.
Of course you think you understand the economy better than main stream economists, just like you understand evolution better than biologists. But just for a reality check, read Alan Reynolds (linked above). In a nutshell (pun intended) he says that we should not grow the deficit because it’s bad for the economy and burdens our children. But he lost the credibility to say that when he supported the unfunded Bush tax cuts.
Hopefully the do nothing Congress will continue to do nothing. Let the market adjust as it always has in the past. History shows that every time the government steps in they just make things worse. The scariest phrase we taxpayers can ever hear is, “don’t worry we are from the government and we’re here to help.”
I agree with the Examiner, et al.: if a tax rebate e is good now, why are the permanent Bush tax cuts so bad that the Dems have pledged to end them? Are they trying to save us from economic growth and stability?
The 2001 “stimulus” allowed everybody to buy a digital camera, and that was about it. What single industry will get a temporary boost this time?
Jeez, what a sham!!! Between the fed, state and county, I pay 55% of my income in taxes, thanks so much mastah gov’ment for “giving” me back $800.00. What a joke. The failing mortgage crisis will be passed on to the taxpayers who haven’t defaulted on their loans. This is the same congress that passed a new bankruptcy law to protect the banks and credit card companies and punish the individuals, insuring that only death will release you from credit card debt. Thankfuly, my debt is minimal and I am working to zero it out by paying for everything in cash and getting away from materialism, but then, that means that I am not doing my part to keep the consumer economy of the US going-right? No answers here, only frustration.
The purpose of taxation is to raise sufficient funds for the government to operate. How hard is that to understand? Yet, politicians screw around with the tax code to deliver subsidies to interest groups that they would never vote for if it came in the form of payments out of the treasury. I mean, would you subsidize a hedge fund? No wonder the Internal Revenue Code and its attending Treasury Regulations have become encyclopedic in size.
The reason for a ‘tax rebate’ is that:
1. I can point out that I did it.
2. I can give the rebate to folks who don’t pay taxes.
Tax cuts allow people to plan and invest and not be dependent on political whims – thats why they are bad, oh and btw you can’t give money to somebody who doesn’t pay taxes.
And that, ladies and gentlemen, will be the voice that carries the day in the end.
Your average worker doesn’t want a recession, because recessions mean job cuts and nobody wants to lose his or her job. No amount of “strong medicine” and “But-it’s-good-for-you-in-the-long-term” explanations will make any difference to people worried about getting laid off.
Your average politician doesn’t want a recession, either, especially in an election year:
- If you’re a Republican, you can’t afford to get tagged with the “Nero fiddling while Rome burns” accusation or to be compared to Herbert Hoover;
- If you’re a Democrat, you can’t afford to pass up the opportunity to blame Republicans for the “crisis” and promise everyone that you’ll fix things with lots more government spending – which is what you always wanted to do, anyway, only now you’ve got an excuse to call for it openly.
The American electorate isn’t comprised of economists, but of people for whom “The Economy” is measured in terms of managing their own paycheck-to-paycheck lifestyles. If or when a recession comes, they won’t be bothered with macroeconomic platitudes and bromides – they’ll be more interested in figuring out who to blame, and who sounds like they’ve got the “solution” – regardless of whether that solution makes any real economic sense.
Ronald Reagan understood this mindset perfectly in his 1980 election campaign, when he quipped,
“It’s a ‘recession’ when your neighbor loses his job; it’s a ‘depression’ when you lose yours; and it’s a ‘recovery’ when Jimmmy Carter loses his.”
Have the trolls ever considered cutting spending?
And may I add, take the oil in Iraq as reimbursement for our cost.
Despite Rush Limbaugh’s valiant attempts to reassure us that we’ve never had it so good, financially speaking, the handwriting is on the Big Board. And I’m seriously considering cashing out my retirement portfolio for foreign currencies and gold.
See, I’m not fooled into thinking this is just a momentary market “burp”. I believe we are into a full fledged case of indigestion. And it’s going to get a lot worse before we can spell r-e-l-i-e-f.
So, who among the presidential candidates is talking about the financial precipice our country is teetering on? Who’s “straight talking” with us about it? Hint… it ain’t McAmnesty.
Why doesn’t anybody seem to remember that Barney Frank that wonderful )(&*^&$ from Mass. got a bill passed that required banks to loan money to people that could not afford to pay it back…..under the guise of housing the poor downtrodden. Problem is nobody thought about what happens when nobody can pay it back. How you gonna fix this Barney????? Throw some more money (debt) at it? You are a simpleton and a moron and the world should vilify you for it.
I’m sure the executives at The Bank of Illegals in America will be sure and take their full salaries anyway…but they should Suck It Up.
The most interesting outcome of this I’ve seen thus far is the Wall Street Journal column admitting that the “global economy” is really still the “U. S. economy” as I tell my skeptical better half repeatedly. Otherwise, Michelle, there’s enough background noise. This is an election year. Find the positives for us.
P. S. The drama on this column is similar to that seen on far left moonbat blogs. Calm down. Ben Stein said it best: Slow down personal spending; put your head down at work – first in, last out. Sheesh.
Or do as he does and make more inane commercials.
AlohaGuy (#44)
It’s not up to the trolls. Your guy is in office. Reagan also cut taxes and increased spending, which drove David Stockman (a true fiscal conservative) crazy.
My question for all of you is: if deficit financed tax cuts were good from 2001 until 2006, why are they bad now? The stimulus is, after all, a tax cut.
#29 you hit the nail on the head the worst thing this country allowed was the JP Morgan gang get rid of the gold standard and start the Fed Reserve!
That guy knows what he’s talking about. Make the tax cuts permanent.
And while you’re at it, have Chris Dodd and the Senate Finance Committee move on the appointments of replacements for the two Fed Board of Governors members who retired months ago. The President has nominated two fine career economists, not two political hacks who would be beholden to Dodd, and who would try to foist more ridiculous short term fantasies off on the public.
I’ll take all of my stimulus package at home, thank you very much (If you get my drift). Not from a bunch of idiots that I wouldn’t hire to paint my house, let alone balance the government’s checkbook.
Also, the money given back is likely money never paid. I pay significantly more than $800 in taxes, but I am in the top half of tax payers who foot 97% of the federal government tax intake acording to Rush Limbaugh’s truth about taxes chart. Somehow or another I am supposed to beleive that they are only going to give the $800 to people who actually paid taxes? I feel the more likely thing that is happening is it is my wallet that just got stolen and the theif is handing my money out to other people. Personally, I think that if $800 of my money is going to a charity case i should be able to decide who gets the money. maybe I would rather not have my money going to a crack addicted prostitute who has to pay for frequent abortions and treatments for STD’s and only pays taxes on 10% of the income she really earns.
I’m against huge deficits no matter who is in office. My point is that your side – traditionally more so than Republicans – only talks about taxing, never cutting spending. Granted, the distinction is less clear these days. In your own personal life when times get tough, do you spend less? Who says tax cuts have to be deficit financed?
“Common ground” with the Dems is the ground they will bury you in.
I cite Reagan’s agreements with the Dem Congress on tax cuts. Doubtless, there are pages more.
Don’t I recall that when the Dow Jones finally hit 11,000 some years ago, it was taken as a sign that our economy was incredibly healthy and robust? Exactly how is it catastrophic if it is down to 11,900?
If I win a hundred million in the lotto and I spend it down to 99 million, am I now in a financial crisis? If I hire people to dig holes and then move those holes around, will that create the financial stimulus I need to regain my financial health?
Just look at the value of the dollar. Compare that 8 percent increase to the increase in the price of gold. The reality is that the dollar is worth less, so the stock market as measured in dollars is worth less.
Great post Regulus…nail on head.
There is a thing called the “free market”. It has always worked and will continue to work without the gov’t so-called “help”. I see old Hillary wants to freeze foreclosures on homes. She also wants to put a freeze on interest rates for mortgage companies, for 5 years. Excuse me, lady, you’re running for President, not Emperor. You just can’t sit down at the desk and dictate policy and pass your own bills (as you tried to do with Hillarycare). There is a thing called the “contracts clause” in the Constitution and it isn’t “living and breathing” for you. Passing freezes on interest rates will kill a lot of companies. Let the free market work. Lord knows when the gov’t gets involved, all heck breaks loose. As far as the economy goes, you candidates need to understand that the President does not introduce, pass, and sign bills all by himself…as least for now. Who knows next year?….
If I planned my business like our government does, I would be out of business in week. Our elected officials can not keep giving and giving out of the actual taxpayers paycheck to those who don’t without a bust to our national economy. Why in the world don’t the politicians let us make our own decisions on how we deal with our lives? This ‘bandaid’ is a bunch of curd to intelligent investors. The only ones making money today are the brokers, selling alot and buying a bit. Bet ’some’ politicians did good today selling short! The MSM has so many people in our country thinking we are but two days short of being like Zimbabwe in our economy, it makes me sick. Everytime the ‘old bat’ comes up with a new plan for the poor, the stock market craters. She has gobs on plans to take from us who pay, to give to those that don’t.
Gotta vent!
L
I was about to say the same thing, dakine (#60) about Regulus (#43).
If a candidate for the executive in a democracy (even a representative democracy) isn’t ultimately concerned about “me” or “us” then they aren’t receiving a vote from the American voter who manages to overcome his or her apathy on November 4, 2008.
Elections are the mechanism we agreed to use to settle difficult questions (even if they’re the wrong questions to be asking, like all of this recession blather.) They bring out the core beliefs and self-concerns of those that choose to choose.
To that end, they serve to trigger self-examination and reflection, to ponder what is best for country and, increasingly, world, to contemplate the long-term implications of our actions on generations to come.
For those of us that choose to avoid, or are simply unable to perform, that difficult task, elections can lead to bringing out our basest fears and most selfish motives, to concern ourselves with our short-term financial gains or losses, to quell our envy in the name of fairness or equality, to consider only what will keep us risk-free and comfortable.
That is the price of democracy. The FF anticipated that people would drift into the latter camp and put us all in peril of having our uninhibited desires outpace our capacity to provide and to vote ourselves all of our hopes and dreams without the virtues of sacrifice and responsibility.
We’re moving inexorably toward the breaking point when we will make ourselves irrelevant on the world’s stage. It’ll take time, but if we don’t slow and reverse our course, it will happen.
And we won’t be able to blame the politicians. They’re just catering to our ignorance and wants. They are nothing more than the personification of our collective will.
And don’t speak of a revolution. There is no incentive to overthrow a democracy. The majority need never lead a revolution. Majorities are just replaced.
Unless we change, unless we change in our very core, unless we overcome economic ignorance and our will-to-comfort, we will simply linger on, smiling stupidly no doubt, to oblivion.
(Maybe I shouldn’t have skipped lunch. I get a little down when I’m hungry.)
My hypothesis is that the Democrats are willing to risk a Depression in order to take the White House for a generation or three. In their corner are the leftists at GE and George Soros.
It’s not for nothing that Soros was out there by 9am calling this the worst economy since the 30’s. Pray tell me, George, how much of the unjustified run-up from $35 to $95 in the price of a barrel of oil is your doing? It sure is a good way to let the Democrats set up their political machinery isn’t it? More effective than giving the DCN money and properly staged, quite profitable.
Also in their corner are the immense public employee pension funds. You can be sure that they had already dumped big positions since Dec 31 when this ‘bear’ market started dropping.
Meanwhile, Bush got Paulson — a Goldman Saks Democratic activist — as his ’sanest’ spokesperson. Did anyone else notice how painlessly Paulson’s appt went through obstructionist Congress? Nowadays, all his words are damning by faint praise of this wonderful economy we’ve had since Bush has been in office. (
the rest of that message, guess paren-greater than-5 is some sort of escape:
less than 5% unemployment with $100 oil!!)
(Subtext sideshow: For six years, Robert Reich has been on Kudlow crapping on the economy and promoting class warfare — ‘the little guy that sticks up for the little guys.’ He’s had a near fulltime job telling his lies. As has the rest of the socialists cum ‘economists’ that get featured on CNBC et al as balance. I guess the fact that the head of CNBC is a radio jock from Berkeley has nothing to do with all that.)
Cut to the chase: If my hypothesis is right, expect the market, the economy, the Republicans and almost everyone but Al Gore to get clobbered. If I’m wrong or better, underestimating the effectiveness of Bush, Cheney and chums, we’ll fret around for another 2 months, until everyone that matters (banks mostly) gets their piece of the pie and then we’ll go back to setting new all time highs in q3, q4.
Truth be told, I’m leaning toward the latter. I still hate Soros and Reich though. Good thing I’m half Hungarian so I’m not a bigot. And I’m only a couple inches taller than Reich. But so is everyone but Krugman.
Chicken little syndrome.
IMHO
World markets are set up with speculation playing a certain percentage and those that gamble swim like a school of fish toward a food source in a feeding frenzy or franticly fleeing a shark.
Other than its good for the Feds to lower the interest rates, the market isn’t that bad, the doom and gloomers just have to much influence.
Common ground isn’t:
1. Canning the AMT
2. Making the tax cuts permanent
3. Cutting spending
So, what is it?
1. Keeping the non-inflation adjusted AMT to keep taxing the rich! damnit! We need that easy money! We can’t give it up now.
2. Making sure we get a Democrat in office, and keep the congress in our hands so we can get rid of this stupid tax cuts for the rich! Imagine if we can’t tax the dead anymore! We can’t possibly have that!
3. Let’s spend more money, we’ll just tax the rich when we need to. That’s what we’ve always done in the past.
You want to help easy the crunch on American’s pocket books? Cut all the pork and give us our money back!
I no longer believe that either party has anything close to a “right” idea about what to do with the economy. In fact, I think the “free market” has become anything but free due to collusion and market fixing. Face it, our dollar is near worthless and everyone’s plan is to throw more worthless money at the problem. Our government stopped restraining corporations from preying on our citizens and we have the subprime mess and much much more to show us that Teddy Roosevelt was correct to bush up monopolies and trusts. This is especially true now when everyone on either side of the Presidential race is a corporate shill of some type.
To whom it may concern:
The laws of economics are inviolate. They are as solid as mathematics, they are far more trustworthy than physics. As long as there are individuals, and there are values, and knowledge and abilities differ, there will me economics. Governments can try to change the game, bend the rules, load the dice, but they cannot escape the unpredictable costs and consequences of their actions. Trust me: they will not like the consequences. Neither will we.
Or to put it another way: “compassionate conservatism” = economic incompetence.
Mt stock broker is of the opinion that the marketperecptions aren’t driven as much by panic as they once were, and figures in a few days things will even out when everyone realizes that the sky isn’t falling. He said that on Friday, and the upturn at the end of the day today even after the asian markets tanked shows his crystal ball might be a little less foggy than most. Let’s hope so, anyway. That would make most of the discussion on this thread moot, and that would actually be a good thing.
Do I understand you correctly? You want the Fed to tighten
credit and cause a global recession on purpose? And you think that only evil lenders and irresponsible borrowers will be hurt by this? I suppose you will take care of any innocent people who lose their jobs or spouses during this recession and can neither make their payments nor sell their homes?
The last recession was triggered by Osama Bin Laden. I’m sure he thought triggering a US recession “would be good for the soul.” That was sure a lot of fun. Let’s do it again! How about an order of famine and pestilence to go with that recession?
I’ve got another idea. Since the Fed doesn’t listen to any of us, what if we just elect a Democrat for President? Then our taxes will increase until sooner or later we will get that recession we so long for.
So much for the Community Reinvestment Act of 1977. Guess that backfired. Now we need more meddling by the Feds. All this so-called stimulus package will accomplish is more control of the economy by the government. Chavez, et.al., at least did it all at once, rather than our government who has to be sneaky over time. Results are the same. Government control of the economy. If I own a business and make a contract with a customer, it can be “legally reviewed” by the government. In fact, even a private contract between citizens now, can be held “in review”. If Washington doesn’t like it, it can be terminated or adjusted to its liking. So say 9 judges. The idea of privately owned businesses is quickly heading into oblivion.
I’m still always puzzled why politicians think they are smarter than the market. Hate to break it to them – but Adam Smith and the Invisible Hand are ALWAYS smarter than any of us individually.
We hear all the time – it’s for the children – then why on earth are they insistent upon saddling the children with a mess?
Just as I had suspected, numerous illegal aliens are apparently walking away from their mortgages and abandoning their homes for foreclosure.
Still waiting for the mainstream media to discuss this aspect, but I certainly won’t be holding my breath while I wait.