Archive for January, 2009
Schiff Responds to Shedlock
Friday, January 30th, 2009
First of all, the hyper inflation issue is a straw man at best. While I often talk about the possibility of hyper inflation, I have always said that it would be a worse-case scenario that would play out over many years. The fact that it did not appear in the first year of the economic crash (2008) does not invalidate my position.
Personally I’m still not convinced. Schiff was on CNBC just a couple weeks ago proclaiming “inflation is here.” Now he appears to be back peddling. I’ll stick with Shedlock.
Yves Smith also chimes in.
Shedlock vs. Schiff
Monday, January 26th, 2009
I would advise Schiff to toss his hyperinflation theories out the window and listen more to his research analyst. However, Schiff cannot and will not change because he has two books calling for hyperinflation.
On the other hand, I can change. I called for deflation and it is here right now. I do not have to wait for it. The only debate is how long it lasts.
At the appropriate time, I expect to transition my stance towards a stagnant slow growth period in which there will be inflation but not by a lot. In such a scenario, the US would hop in and out of recessions for up to a decade, much like Japan.
Time will tell whose model is correct. I reserve the right to change my model. It’s too late for Schiff to change his. The damage has already been done.
Personally I put more faith in Shedlock, having followed his blog for about a year now I think he really hits things pretty spot on. Schiff loves to rant and is clearly (from his commentary on CNBC’s Kudlow) a hyper-partisan.
TARP Asset Losses – 64 Billion and Counting
Saturday, January 17th, 2009
CBO estimates that the net cost of the TARP’s transactions (broadly speaking, the difference between what the Treasury paid for the investments or lent to the firms and the market value of those transactions) amounts to $64 billion—that is, measured in 2008 dollars, we expect the government to recover about three quarters of its initial investment.
It’s been so successful, Obama plans on accelerating the mortgage assets purchase program using the newly approved TARP fund. Yeah!
While Summers told Congress Obama’s Treasury would use between $50 billion and $100 billion for a mortgage modification program, a good chunk of the rest of the funds could be used to buy the illiquid assets from banks. The FDIC, which has authority to take “any action” with insured deposit-taking firms deemed necessary to counter “adverse effects on economic conditions or financial stability,” could also play a role.
“We think by leveraging TARP funds in this way, you could have a significant capacity to acquire troubled assets,” Bair, who is set to stay on under Obama, said. Officials could “require those institutions selling assets into this facility to contribute some capital cushion themselves.”
Electricity Use
Saturday, January 10th, 2009
- turning up/down the thermostat in summer/winter
- delaying the inevitable turning on of ac/heat
- shutting down electronics at night, especially computers
- being more conscious of turning lights off
- using less hot water – shorter showers, more efficient use of the laundry machine / dryer
It can be done!
Gold Rush
Saturday, January 10th, 2009
A couple articles over on Jesse’s Café Américain- Link
Uncharted Territory
Saturday, January 10th, 2009
The Romers briefly described how different administrations responded to recessions. All the administrations, Democratic and Republican, resisted large-scale fiscal stimulus plans. They didn’t believe they could time a stimulus correctly. They didn’t trust Congress to pass the bills quickly or cleanly. They decided they shouldn’t be making policy in what Kennedy administration economists called “an atmosphere of haste and panic brought on by recession.”
The Romers’ essay exemplifies the economic doctrine that reigned up until a few months ago: fiscal stimulus plans that try to time a recession are dangerous, unproven and unnecessary.
That doctrine has suddenly vanished. But not because we suddenly know how to create effective stimulus plans. Last year, the Congress passed a $165 billion plan that seems to have done almost nothing for the economy. The doctrine has vanished because this recession is deeper than the others and we’ve run out of other stuff to do.
Today there is wide support for fiscal stimulus. It’s just that there is no historical experience to tell us how to do it, and there is no agreement on how to make it work. The economists’ prescriptions are all over the map.
Obama is compelled to jump into uncharted territory, with no compass or guide. He could have chosen to spend the big money that is apparently required in cautious ways. He could have chosen to pick out a few easily implemented policies that could be enacted in a way that is targeted, temporary and timely. He could have chosen to merely cut the payroll tax, boost aid to the states and do infrastructure projects.
But the Obama presidency is going to be defined by his audacious self-confidence. In Thursday’s speech, he vowed to do everything at once. He vowed to throw the big things into the stimulus soup — tax cuts, state aid, road and bridge repair — but also the rest of the pantry. He proposes broadband projects, special education programs, a new power grid, new scientific research, teacher training projects and new libraries.
This will be the most complex piece of legislation in American history, and as if the policy content wasn’t complicated enough, Obama also promised to pass it via Immaculate Conception — through a new legislative process that will transform politics. The process, he said, will be totally transparent. There will be no earmarks, no special-interest pleading. In a direct rebuttal to Federalist No. 10, he called on lawmakers to put aside their parochial concerns and pass the measure in weeks.
And as if that isn’t enough, he promised next month to make repairing Social Security and Medicare a “central part” of his budget. “I’m not out to increase the size of government long-term,” he told John Harwood of The Times.
The problem it seems is not with economic theory, which seems to indicate stimulus has little effect and is usually wasteful and poorly timed. The problem, is in America’s mentality – we demand growing markets, wealth in housing, good times for all. During a downturn, we seem incapable of accepting the inevitable results of our own actions. That’s when political winds always seem to shift. It doesn’t make any difference who’s in control, both parties love to spend money. At some point though, this is all going to come crumbling down around us. I sense we are closer to that moment than ever before.
Obama should look more closely at the evidence and make better decisions. He has enormous political capital with the people right now. He could leverage that to set the country on the right path, to promote real change. It doesn’t appear though that he is willing to do so.
Pragmatism is Good
Friday, January 9th, 2009
At present, I see very little in the way of Keynesian pyramid building. Nor do I see an attempt to grab the revolutionary moment by the horns and push the U.S. in a new direction. Thus, thankfully, No (new) New Deal. There is plenty of uncertainty in the economy but it’s not regime uncertainty.
“WE ARE STILL HERE!”
Wednesday, January 7th, 2009
NRA Version 2.0
Wednesday, January 7th, 2009
H.R. 4040 – Consumer Product Safety Improvement Act of 2008
I find it ironic that this country, and specifically it’s leadership, are as oblivious to the parallels of the Great Depression as is obvious. This bill was passed by Bush late last year. FDR’s Ghost channeled through Hoover?
Intel
Wednesday, January 7th, 2009
They revised downward 22% from November estimates today.
