Some commentary on today’s economic development —
A dramatic gap has opened between the economy as Washington sees it — and wants to intervene in it — and the economy that actually exists. Whatever weak recovery we might have hoped for is being hindered by global commodity prices, consumer deleveraging, fears of flagging demand in emerging markets, earthquakes in Asia, and much more. Globally, it’s been an almost uninterrupted run of crises and bad luck. Meanwhile, Washington just spent two months arguing over whether it would pay its bills or spark an unnecessary financial crisis.
Last week, Congress resolved that question. This week, the markets are tanking. Which suggests that Washington is asking itself the wrong question.
Just remembering back now the international financial institution folks back in 2009/2010 saying it was important to rein in spending since the global economy was already coming back and the risk was inflation and indebtedness. 1937 anyone?
Paul Krugman says, in so many words — toldjah so.
Kevin Drum explains why European banks are in perilous circumstances David Leonhardt says that stock values could go lower still.
Why is it that I think this second dip may end up being a head-long dive into an empty pool?
ASSHOLES!!!
OK. What happens? The Dow is down 512 points.
Did all that money go to gold? No. Gold is down $18 per ounce from yesterday.
Silver? No. Silver is down, too.
Petrodollars!!!!! No. Oil futures today are at the lowest level since February.
Eurodollar. I can’t find the hard number.. it looks like the Euro barely gained against the dollar, but problems on that side of the pond don’t make the Euro a safe haven.
There wasn’t a stampeed either way on Treasuries.
So where DID the money flee? This is interesting. Under the Mattress – in DOLLARS. With markets in major flux globally, the DOLLAR is now deemed safest. Least that’s my read. If Krugman sees it differently, go with him. But I don’t make this out any other way.
Man, that would be an out of pocket expense, for sure.
Krugman writes:
Hahahahaha, now who’s been sipping the jello shooters?
I fear that Obama’s middle name will change from Hussein to Hoover.
Can’t we just start another war?…Or did Bush use all our unnecessary wars to help the economy cards up ?
Moonbat – Check your history. Obama made the same mistake as FDR. After FDR’s first term we were still deep in the depression, because FDR was too timid with his stimulus, and FDR backed off too soon on government spending.
Krugman was right from the start – the stimulus should have been bigger and directed at consumption. A lot of the stimulus was tax breaks for the rich which had no stimulative effect. The political will for a second stimulus is not there in Congress. Neither is the money. But capital is there – two trillion that Wall Street is sitting on.
If it was up to me- I would adopt a ‘use-it-or-loose-it’ policy. If you are making money in the US (and Wall Street and the multinationals are doing VERY well…. you pay taxes at 35% UNLESS you are hiring and growing at a rate in proportion to your economic footprint in the US. Hire and grow here, and you can keep a big chunk of profits… Stay stagnant in terms of US jobs…. 35%.
I’m very aware of FDR’s capitulation to the deficit hawks in the late 30s. It parallels the way Obama let this concern triumph over the recent budget discussion. Europe, and now America will be going through austerity, and it won’t be pretty.
I mentioned the idea of Hoover not so much because Obama is unaware of the lessons of the 30s, and how the GOP at that time did nothing, which is what made the Great Depression Great, but because Hoover is kind of a shorthand for a lot of things. Not only have the deficit hawks dominated for the last year or so (recall the catfood commission), but Hoover was kind of a superman – he did amazing things in reconstructing Europe after WW1 – in much the same way that Obama is brilliant and surrounds himself with brilliant people. And yet both Obama and Hoover appear out of their leagues in coming to terms with massive changes that go beyond anything their personal histories are or were capable of effectively dealing with.
You all can complain about Obama; but, I shudder to think what the economy would be doing if we had President McCain.
I don’t remember there being overwhelming support for stimulus spending back when it first was proposed. And that’s why it was way too small and had too many tax cuts. All it did was stop the bleeding, instead of creating a sustainable growth spurt. That lack of enthusiasm and support for a Keynesian move was as usual due to the intransigence as short-sightedness of the Republicans and their fellow travelers the Red Dogs (ain’t nothin’ blue about them).
I watched Chris Matthews’ final segment “Let Me Finish” yesterday, and in it, he called upon Obama to seize the moment and lead on jobs.
http://www.msnbc.msn.com/id/3036697/ns/msnbc_tv-hardball_with_chris_matthews/#44026027
That sure sounds good. And it’s easy to say. But he just went through a protracted and torturous fight over raising the DEBT ceiling. The entire focus of Congress was on the DEFiCIT.
How do you now, as President, redirect a Congress to jobs, which would call for a STIMULUS, and a massive one at that, when you have a House that has a significant amount of loons who wouldn’t shake out a nickel out of their own pockets to save their Mama if it meant a vote?
Obama, much as we wish we could, can’t snap his fingers and get Congess to pass a stimulative jobs bill. The reality is that we have a Congress where Republicans control the House and don’t want to help people because it might reflect well on the Democrats, and you have a Senater Majority Leader who has specified that the single most important goal for him and his party is to make sure that this President is a one term one.
So what, Chris, is he to do?
Maybe the Fed can scrape up some cash, but that’s nothing compared to what we need, which is probably in the neighborhood of at least a 1.5 trillion dollar stimulus, if not more, and I don’t see that coming. I believe it may come if/when we have a Republican President and Congress. They’ll find money at least for infrastructure repair and the military industrial company. You see, Reagan will have once again proved that deficits don’t matter. Or they don’t if they mean keeping Republicans in power. Especially when the money they’ll use will come from social programs like Medicare, Medicaid, and Social Security. And that will create its own economic catastrophe later on, but that’s long term thinking, and in DC, we don’t even do the old Soviet 5 Year Plans, we only have 2 year plans whose only goals are geared to reelect the incumbents.
As for the market, it will continue to go down. Steeply, I believe. What is there to make it rise? When it rose dramitically over the last 2+ years, that was money that was put in by the peole who got out just in time last time, and saw opportunities for portfolio growth. And now, having regrown their portfolio’s, they see that there really is nothing behind the rise in those markets except their own speculative need for more and more, and will now sit on their cash until the next opportunity.
So, to answer Doug’s question, yes, the money did go in their mattresses. And there it will stay. And there’s not much Obama can do about it without Congress’s help. And the Republicans are not about to throw him a lifesaver – not when there’s and anvil handy.
There’s an old saying:
‘If it ain’t broke, don’t fix is.”
Our system of government is broke. And not financially as Conservatives would have you believe.
Lincoln finished his Gettysburg address with this line:
“…and that government of the people, by the people, for the people, shall not perish from the earth.”
Substitute ‘corporations and the rich’ for “people,” and you can see why we are perishing. Rapidly.
http://www.heraldtribune.com/article/20110802/ARCHIVES/108021012/-1/todayspaper?p=1&tc=pg
Didn’t Osama say something about luring America into the wilderness and bankrupting it?
“what the economy would be doing if we had President McCain.”
Bonnie, I think it would be about the same, but everyone on the right would be blaming Nancy Pelosi.I think righties just like the way her name kind of rolls of the tongue.(and McCain would attempt to bomb us into prosperity)
Swami. HELL, YES WE CAN!!
There’s Syria and “Eye-Ran”; some shit is brewing in Kosovo too, and Somalia needs savin’.
There’s a virtual cornecopia of war prospects on the horizon.