Worked so badly from the 1930s to 1994...

well, Tina, that sure as hell was untopical...

and given the Republican's recent broadcasting of their desire to block any and all legislation just to make the Democrats look bad, I hardly see why this measure is unreasonable.

--
http://bexhuff.com
Of COURSE you can trust the US Government! Just ask the Indians.

In the beginning of the year the stock markets had an upside potential of 20% during the 6 first months of 2009. And the stock market seems to be still bullish. (It went down during this week because of banks. Something might still happen during the weekend to them: TED-spread is up)

This first recovery of the stock market is "easy" compared to what will follow. The market might go sideways for years. When I suspect that Obama's economic policy will translate to inflation and tax increases, I'm here in good company. I already wrote that this site is full of redneck republicans who do not believe in the economic policies of Obama.

You should look more micro economy and monetary signals instead of general macro. And the Chinese foreign trade statistics.

_{--Storm brings only richness with it}

for those of us not well-versed in finance...

--
http://bexhuff.com
Of COURSE you can trust the US Government! Just ask the Indians.

and stagnation is supposedly better than an investment that falls in value.

the problem with "moving sideways" is that after you adjust for inflation, your investment actually loses value even though it appears to maintain value-- i.e. moves sideways.

hence, in order to move sideways, the investment really needs to grow at the rate of inflation or else you're losing money.

This is unforeseen hysteria in the USA. The rest of the world takes this as normal.

The markets have been indeed as volatile as in the 1930's but otherwise this seems to be just 1980's.

are acting like an unprecedented economic collapse seriously threatens

Except ECB, but media or "pundits" do not tell that to you :) On the contrary, I read, how a "pundit" wrote rubbish on the balance sheet of ECB. It has expanded only 25% when the balance sheet of Fed expanded 100% and the balance sheet of BoE even faster. The pundit wrote that the expansion speed of ECB was the fastest :) And the pundit obviously knew that he was writing propaganda.

I think that the economic policies in the USA are aggressive now because it was fashionable during the previous recession. In theory there exists the danger of overshooting in actions, but I do not know, if it is a real threat or just entertaining pundit rubbish.

_{--Storm brings only richness with it}

then the (monetary and fiscal) inflationary implications of current policy are truly scary. The powers-that-be will never be able to raise interest high enough quick enough to contain it. The US will go from the frying pan into the fire.

In Japan they failed to start inflation.

The Fed seems to be tightening already (see balance sheet).

I wrote earlier a sentence about "supervolatility of dollar".

_{--Storm brings only richness with it}

We can't keep the interest rates this low for too long and not stall the economy... I thought the whole point of the Obama stimulus was to create demand for manufactured goods so that prices would stabilize and (maybe) rise again.

--
http://bexhuff.com
Of COURSE you can trust the US Government! Just ask the Indians.

That the meme next year is going to be - Have we overstimulated. But frankly Obama wants to get things moving again fast because he has a lot of other fish to fry and has only eight years to do it.

But the plan is precisely this. Obama's team have stated that there is no way the US economy has grown over the next ten years as it has over the past thirty years on consumer spending. That is a spent force. BUT. It can grow even faster over the next ten years on the shift to alternative sources of energy.

The United States spends $1 trillion per year or 7.6% of its economy every year overseas for energy. The goal is to keep that dollar here as much as is possible in as short a time as possible. Keep the dollars here. Every dollar on foreign energy creates two jobs in the US, where every dollar spent here creates eight jobs. And the payback for every dollar here is therefore is more than a tripling of the dollar as a ripple effect through the economy. That is 21 points of GDP growth potential from this issue without even considering other factors that drive growth. That is 2.1 GDP per year.

Those are the kinds of things they are looking at. It is real this time.

While I agree with you that the intention is to bring the petro-dollars home, that is going to be a very expensive challenge.

However, I am less sanguine about the numbers than you. While the numbers you cite suggest that the crisis in not really that deep, the actions of the Fed and Treasury, and the pols to whom they are taking, suggests that something different is transpiring from what those number imply.

The problem seems to be transparency. Only a very select few at the top know what the supposed numbers are and are apparently reacting to it. Moreover, no one knows whether the supposed numbers the folks at the top are reacting to are actually the real numbers. Since the markets have been excluded from the process, the actual values are indeterminate.

What seems to have happened is that the financial sector transformed itself from the staid banking, insurance, and real estate industries into a combined industry that would be more go-go than the gambling industry, with corresponding profits, and comparable transparency and ethical standards.

The new industry set out create new instruments that could promise extraordinary returns at reduced risk owing to risk spread, justified by complicated models based on faulty assumptions. They also lobbied to loosen restrictions to permit greatly increased use of leverage.

The result was several fold: excessive use of leverage, mispricing of risk, ignoring of systemic risk, and taking advantage of the moral hazard of being too big to fail. This scenario was facilitated by a lobbied government that reduced regulation and oversight, as well as a compliant Fed. Fiscal policy enabled the new financial entrepreneurs to avoid taxation on their huge profits, salaries and bonuses. All the incentives were in place for excessive risk-taking with other people's money. That attitude was, We're making a killing today and tomorrow, IBGYBG. So who cares. Besides, if we don't cash in on this, someone else will.

The upshot is that the world is now swimming in debt, those who are overextended are deleverging and when they can't, going broke, the financial idustry is insolvent, and the public does not yet know the extent of the exposure owing to absence of transparency.

The tip off here is the total lack of transparency in allocation and use of the TARP funds, to wit, the 350 billion that has already been provided.

No one other than those behind the curtain know what the numbers really are, what the exposure it and where it lies, and who is involved. Many people at the top are acting like this is a very serious crisis. The conclusion can only be that something is going on behind the curtain that we not only do not know about but also that it seems to be worse than the numbers which are public suggest.

Meredith Whitney Predicts Banks Need More Capital (BAC, C, JPM, WFC)

the US economy has grown over the next ten years as it has over the past thirty years on consumer spending

It seems that the US economy didn't grow at all without housing bubble over the last decade.

It seems that Obama has stolen my ideas about renewing energy.

But I have still my ideas about health care reform to sell :)

_{--Storm brings only richness with it}

well, you can see why ethanol is popular because the farmers buy foreign oil (two jobs) and then americans buy ethanol (8 more jobs based on your numbers).

my critic of your analysis is that oil (energy) drives automation and automation destroys jobs.

moreover, the middle-east is heavily investing in solar and other alternative energies so even if it's manufactured here, the middle-eastern countries will be patent holders; that means they'll continue to suck dollars out of your pocket!

I'd also suggest that if we use alternative energy, that enables energy redistribution; hence, the oil we used to use will go to china so our goods can be manufactured.

EOM

This is the 80's. The residential mortgage default rate in this recession has reached about 4.85%, well below the 7% default rate in 1981/82. Why is it a meltdown?? Because Bush and company changed the sixty year old rule that for every dollar of equity a bank could lend eight dollars of debt which makes banks stable until defaults hit 12.5%. In 2004 his Treasury Secretary got it changed to one dollar of equity allowing for 30 dollars of debt, which allows for only a 3.3% mortgage default level, a laughably low cushion.

All the $700 Billion is doing is getting the banks back to their 8 to 1 ratio.

In fact the car sales level right now is not even as bad as it was in 1991.

Every stat I look at is simply not as bad as other times in our history. Inflation is contained, interest rates are low, unemployment is only slightly elevated, defaults are on the high side.

So I put it in the camp of panic and hysteria. But also a financial system that was allowed to be woefully unprepared for any kind of downturn. It was the usual stupidity writ large that was the Bush White House.

They Enronized the US economy, eviscerated all the old sixty and seventy year old rules designed to allow the economy to weather bad times. To say Bush and his cronies were idiots are too kind. This would have been a non crisis if banking rules had simply been left alone.

Rubin worked under Clinton and then went to CITI and destroyed it. Moreover, the stock market grew at 18% YOY during the Clinton administration. That performance was unsustainable! IMO, Bush is taking the blame for Clinton's mess. Alan Greenspan's brilliance is being reconsidered!

A logical argument for creating hysteria were that it manipulates people to accept bail out spending.

But some types do not seem to get it. They are hysterical and oppose bailouts - LOL.

_{--Storm brings only richness with it}

But some types do not seem to get it. They are hysterical and oppose bailouts

And, curiously enough, Wall Street isn't giving them any money. The money flow has now shifted from the GOP "born again" fiscal conservatives who have suddenly "got religion" to the Dems.

The answer to your question is..., yes. It is a recession and an economic collapse. The Bail Out Bullshit is designed to forestall the economic collapse and save Wall Street and Big Money Boys. It won't do anything to help the recession..., and I don't believe it will forestall the economic collapse for long.

The recession is being cause by the breakdown of The Housing Bubble. As I have said before here..., housing starts drive the economy with all the jobs it creates as well as the raw materials and manufactured products it consumes. The Bubble came about not to "increase homeownership" or to make the American Dream come true for everyone..., regardless of their ability to pay for it. The mortgage regulations were thrown out the window to keep the housing starts and the economy "growing". Those credit default swaps were allowed for the same reason. That housing bubble has now imploded and there is nothing..., including a major infrastructure spending plan..., that will replace it. Everyone from the logger that provides the lumber to build the house to the Circuit City big screen TV salesman that helps furnish the new house is going to be out of work for quite a while. And just think of all the people in between those two that will be out of work..., concrete workers, carpenters, electricians, plumbers, roofers, window and door manufacturers, is short list. The housing bubble has left a glut of houses out there..., there won't be much building going forward. No jobs for all those people mean no consumer spending.

Helping people with mortgage problems is a worthy endeavor but it won't help heal the recession. Infrastructure spending will be a band aid for a few for a while..., but I seriously doubt that it can go on long enough to be of any real help. The other Bail Out Bullshit money will only help those that have money in leveraged positions heal up before the Big Collapse. And that's what it is designed to do..., create a big bounce before the inevitable fall.

Maybe we need The Bail Out. Maybe we need to keep Wall Street and the Big Money Boys solvent. Maybe it would be worse for the rest of us if they went down with us. But I would just as soon take them down with us now. I don’t believe we will be any worse off in The End.

Maybe we need The Bail Out. Maybe we need to keep Wall Street and the Big Money Boys solvent. Maybe it would be worse for the rest of us if they went down with us. But I would just as soon take them down with us now. I don’t believe we will be any worse off in The End.

This bailout will just keep them on top at the End. The fix is in, and it's total BS.

When I originally wrote, "The Crash is Coming..., Bail Out or no Bail Out" I felt pretty sure it bogus and ended the post with this:

"This Bail Out makes no economic sense. I have already heard little Georgie Bush and his cadre scream, “Mushroom clouds on the horizon!!!!!” I didn’t believe it then…, and sure as hell don’t believe it now. All of us Agonists will feel the pain…, but it will be much less and much shorter than predicted by Georgie. And we will emerge much stronger and sooner without this Bail Out. With it…, I fear for all our survivals."

I figured that the rush to push it through was the tip off..., that if time was allowed for examination by others it would be exposed as the fraud I saw. But now..., there just seems to be too many people who see that there is a big problem and that the consequences of doing nothing would result in complete catastrophy. So..., I still believe that the elite will benefit much more than the middle class and the poor..., but maybe..., JUST maybe..., we do need the Bail Out to save the financial system. I still contend that it won't cure the recession.

This one is badly constructed, and does not mimic earlier successful strategies, like (temporarily) nationalizing the banks (or at least taking significant ownership stakes).

Badly constructed, that is, from the point of view of a reasonably fair system. Perhaps well constructed to maintain or enhance the upper-class' status quo.