huskerbob

Will Deficit Stimulus Spending Help or Hurt Economic Recovery?

jpiretti - apologies. It just drives me nuts when people argue for the need for a massive military when it is suicide to fight anyone but weak and friendless nations. That money could better serve our nation spent elsewhere.

Will Deficit Stimulus Spending Help or Hurt Economic Recovery?

Jpretti: you seem to be unaware that we will never be on "full war footing". Our wars are limited to the group of nations which do not posses nuclear or biological weapons and have no allies which are so equipped. Can you name a single such nation which would require us to go to full war footing? I know you probably think it's fun to bomb nations that can't fight back, but there are other countries with nukes now.
We could go to war with China or Russia or their allies, but ask them first to please not deploy WMD's if they are losing.

Will Deficit Stimulus Spending Help or Hurt Economic Recovery?

The author is glossing over the fact that we are getting diminishing returns. He failed to point out the increasing amount of debt required to produce a dollar of GDP, roughly doubling over the last 50 years. And the decreasingly effective deficit spending by the government will of course be even more ineffective due to malinvestment (TARP?), fraud, corruption, and ever constant ineptitude and inefficiency. So don't give too much thrift to the GDP boost from government spending. Building a $300 million bridge serving 50 people in Alaska boosts GDP just as much as private investors spending $300 million efficiently and effectively.
He can sign up his great grandkids to pay for this mess. I want mine to have a better future.

Interview with Peter Schiff: Reflating the Bubble

Good point that the average joe cannot increase spending: decreased velocity of the money supply. However, we will definitely see price inflation in necessary commodities such as oil because we are destroying the dollar's value. Our currency will devalue because it is criminally mismanaged.
At some point, spending will pick up again because the Fed will not let savers go unpunished! This has been stated in writing time and time again. Please read Bernanke and Greenspan on this subject. The only way to spur savers to spend is to make the idea of saving dollars seem ridiculous: devalue the currency.
The public pronouncements that they will act quickly to rein in inflation is counter to everything they are attempting to accomplish. Watch what they do, not what they say.


On Apr 24 09:59 AM OperaMan wrote:

> It seems to me that the hole in this argument about inflation due
> to spending ignores the one key fact of why we are in this mess to
> begin with and that is the collapse of consumer buying power due
> to wage stagnation for at least the last decade.
>
> Unless wage earners suddenly see a vast increase in their earnings
> from labor (where most of us get our money to spend) there will be
> no increase in spending to cause the increase in the velocity of
> money to drive prices up. Given the lack of well paying jobs in
> this country, such a large increase in real wages is, to say the
> least, unlikely.
>
> Given the new realities of declining real wages, and the realities
> of the new frugality (driven by the unavailability of consumer credit
> and a real fear of not having sufficient savings to weather a continuing
> series of personal financial crisis), there will not be any major
> increases in consumer spending (except maybe for the gifted top 2%
> of wage earners) any time in the near future.

A 'Cheer-Cheer Spiral' Appears to Be Taking Hold

There is light at the end of the tunnel, but it's not bright enough to do me any good. Good point that unemployment is a lagging indicator. Unfortunately, expect those numbers to continue to climb for the foreseeable future.
The rise in the stock market doesn't indicate anything to me right now, as I don't see the conditions which led to the downturn being resolved yet.
Add the impending crash in commercial real estate values and increase in vacancies. Increased unemployment. Is PPIF going to work? Not a lot of enthusiasm. New accounting rules to paper over problems.
Not cheering yet. The cheer cheer is spiraling the down the drain for now.
On the bright side, when things do turn around, you can be the first to say "I called it!".

Roubini and Other Doomsayers Will Be Proven Wrong

Your article reminds me of a quote from F. Scott Fitzgerald: "The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function." Take it as a compliment.
"As long as the Fed and the government are doing the right things in ensuring accountability, transparency, and no excessive leveraging in the markets, I shall have no worry for a new bubble."
Given this caveat, I have trouble understanding your optimism. Did someone add this to your article without your knowledge?
All of the bad actors are being bailed out. Massive malinvestment due to easy credit caused this mess, and now the same actors are being bailed out with the idea that they will extend more cheap credit!
I have not read many articles praising the transparency of the bailout so far. Geithner's new plan is a leveraged fund. Who is being held accountable (besides the taxpayers)?
Accountability? No.
Transparency? No.
No excessive leveraging? No. Especially when you consider that it's taxpayer money being put at risk.
Your "cheer cheer spiral" is a few more years down the road, but thanks for the happy thoughts.

10 Reasons Why We Still Haven't Hit Bottom

Great article, many good points.
On point #2, the Fed can't fix liquidity on the lending side, they can only make money so cheap that they give it away to anyone with a pulse. Which is partially how we reached this point. Maybe the market will bottom when the government, not the investor, capitulates.

The Economy on Dope: Investors Fear Inflation, Embrace Gold

Bravo! Excellent article. Expect a lot of vitriol from Paulson and Bernanke sycophants who somehow find genius in making our own Japanese lost decade, albeit on a scale almost unimaginable.
You made a good point that people are abandoning the twilight zone economy for things of more substance: energy, gold, medicine, food.
The lot represented by Paulson and Bernanke, alchemists who tried to make something from nothing and destroyed the economy doing it, are on their way out. Expect them to make an even bigger mess of things before they are thrown on the sh#t heap of history.

The Bubble of Uncertainty Is About to Burst

Many excellent comments, especially ChrisB.
I agree with Leftfield that "any plan is better than no plan" is a completely ignorant statement. Who in their right mind can think that central government planning can manage the economy more efficiently than the markets? If anyone could please look at the hundreds of bureaucracies that make up our government, and point out a single one that is known for transparency, efficiency, integrity, and good decision making, I could have a little hope. To think that the administration of a mega-billion dollar bailout would be handled any more efficiently or prudently than any other government function is lunacy!
We are in a sad state when the government has such a massive effect on the markets. Their only role should be to regulate, and they have failed utterly in that regard. Now we put the failures (like Summers) in charge of restoring confidence in the markets
Another point: to state that "we are in the decade of the bubble" shows historical ignorance. Bubbles have been a problem (on Wall St.) since the creation of the Fed, starting with the Roaring 20's and it's inevitable correction.
The stocks he mentioned as opportunities have rightfully been hammered due to poor management decisions. The problems they have created for themselves are complex and won't be corrected simply with cheap money from the government. Leave them alone! If Ford is strong enough and well managed enough, they can benefit from GM's loss. If GE deals with the problems of their financial arm, they will be an investor darling again. If not, stronger, better managed companies will benefit. We don't need the government (or more accurately, lobbyists) to decide the winners and the losers at taxpayer expense.
I'm sure there are plenty of people like me who are looking forward to investing their savings at much more reasonable valuations.

Intelligent Government Action Is Key to a Market Turnaround

I'm sorry, I missed the part of your article explaining how we get an intelligent government.
"The market will start to turn, and fear will start to abate" when equities reach what people believe are reasonable valuations in light of the economic downturn. This would happen swiftly if the government could butt out.
The government is only confusing the markets, rewarding bad actors and shifting resources to where they would flee in a free market. The market can find a bottom and begin the process of rebuilding on a more solid foundation, or the government can continue the decades-long process of misleading the markets with easy money and bailouts and try to rebuild on a foundation of sand.

Impending Inflation? The Global 'New Deal' All but Guarantees It

In an extended deflationary situation, how will the U.S. service its massive debt? Would it even be possible? They would probably have to print more money just for that purpose. Wouldn't the erosion of the ability to service that debt lead to a weakening of the dollar and massive price inflation?
Beyond that, the Fed and Treasury working together should be able to get inflation back on track. They destroyed 90% of the dollar's value so far, what makes the last 10% so special?

The Time To Buy Is When Blood's In the Streets

Unreal! I can't believe everyone is passing on these incredible fire sale prices! Bravo for being the only person on earth who realizes that there is no risk in paying full price for what most consider toxic waste. The homes underlying these products will soon begin soaring in value again, mortgage payers will all get a nice new job and a raise to cover rising energy and food costs, they'll start cranking out those higher mortgage payments after their ARM adjusts, and people will materialize out of thin air to start covering payments on all the fraudulent loans. You and Phil Gramm are right. The only problem is all these damn whiners! It's all in our heads!
Seriously, some of these assets are probably currently undervalued, but even under Paulson's plan, there is no reason to think that homeowners ability to service their debt will improve. It is very likely that the assets which you seem to think are undervalued now could be worth even less years down the road!
The only reason for Paulson to take on $700 billion of garbage with NO OVERSIGHT and NO ACCOUNTABILITY to anyone is that he is fully aware he will be overpaying. A lot.

ECB Calls Bernanke's Bluff

I wish we could go back to the original definition of "inflation": an increase in the money supply. Then it would be obvious to all consumers that prices are affected by debasing the currency.
"There are significant upside risks for inflation through commodities,” would become "there is significant upside potential for commodity prices", which is none of Bernanke's business. He would be reduced to discussing the "significant upside risks for inflation through" our inflationary monetary policy! It is annoying to constantly read about inflation in commodities, when the weakened dollar is a huge culprit. Many people ascribe their loss of purchasing power to inflation in commodities, not the other way around. They have trouble connecting $4 gas to an "expansionary monetary policy". Whatever works for the fed.
As far as Bernanke is concerned, he has already detailed his distaste for savings and preference for inflation. According to him, the only question is what rate to inflate at. Don't expect much more than a pause in the dollar's slide anytime soon!

1990 All Over Again?

The last commentor makes a lot of sense. If this is 1990 again, where will all the borrowed money that fueled the bubble come from, and who will borrow it? Even if the mountain of debt is piled higher, pushing the market up with it, what will happen when that bubble pops? We need a serious correction to weed out the chaff, and that hasn't happened yet. There hasn't yet been a huge downturn in investor sentiment, and P/E ratios are still well above historic levels. That's not gloom and doom, that's simple observation.