Say, has anyone noticed that the stimulus projects which are getting the most negative attention from the press and the public, actually are the ones that orthodox Keynesianism suggests are the best ones to do? I admit that striking the $600 million for condoms hurts no one but the people in China who would have manufactured the condoms. That one is a good strike, because | Read More »
News stories are now rampant that Obama is looking to “compromise” on the fiscal stimulus package. He has no need to do any such thing. Obama has solid Democratic majorities in both the House and Senate, and can pass his legislation without so much as a single Republican vote. I can guarantee you that the Republicans won’t filibuster the bill in the Senate. We have | Read More »
Treasury Secretary-designate Tim Geithner was reported to have mentioned yesterday that he believes the Chinese are “manipulating” their currency, presumably downward against the dollar in an attempt to goose their exports. This issue is going to get a lot of play in the next few months, because China’s mercantilist policy depends on an artificially undervalued currency. Since this causes tremendous imbalances in global capital flows, | Read More »
One of the most critical problems facing the US economy is the “credit crunch,” which shows up as an extreme reluctance by banks and other financial intermediaries to lend money. Without a normal flow of credit, no sector of the economy can function up to its capacity, and that of course leads to lower output and higher unemployment. You’ve read a lot about the TARP | Read More »
As I write, the public debt (sometimes called the national debt) of the US stands at $6.3 trillion, roughly 40% of GDP. (You’ve heard many people say that the debt is actually about $10.6 trillion, but that’s fictional, as I explain below.) As we know, the question of who will pay off the debt is an interesting and urgent one. Especially now that, through a | Read More »
You don’t need me to tell you what America is gaining today. It’s not easy to escape the sense that we’re gaining something that would make George Washington feel very uncomfortable: a constitutional monarch. It’s just as important to understand what we’re losing. With lightning speed and essentially without discussion, we’ve lost one of America’s oldest ideas: a robust confidence that a civic-minded people, when | Read More »
We’re experiencing an economic recession as a result of several global economic imbalances that have been building for years now. Since sometime in the Clinton Administration, growth in US consumption has been funded by steady increases in the private “balance sheet,” or the net level of indebtedness. During the Bush years, growth was also supported by accomodative monetary policy and fiscal deficits. Since the early | Read More »
Perhaps the most distinctive and broadly-observable change in the public-policy milieu as we enter 2009, is this: America has a new faith in the power of experts to cure whatever ails us. It’s a season not only for big ideas (very few of them new) in public policy. It’s also a season in which we’ll try out a lot of them, in the naive hope | Read More »
It’s pretty clear to everyone that the financial industry is not doing what it normally does, which is to extend credit and lend money. Just as clearly, the decline in new credit formation leads to deflation in risk-bearing financial assets, and a sharp contraction in overall economic activity. Less clear are the implications for policy and for business forecasting. Businesspeople are simply confused about the | Read More »
This morning, we’ll get accelerated earnings announcements from Citigroup and Bank of America. They basically have to do this because the whispering and the uncertainty about both enterprises is starting to get really hard to ignore. And BAC just became the recipient of a government-assistance deal much like what Citi got in December: $20 billion in new preferred equity, and a guarantee of $118 billion | Read More »
It’s interesting that tax cuts have taken a central role in the fiscal-stimulus debate. (We really should be debating whether a massive fiscal stimulus is even the correct approach to the current economic, housing and financial crises. But since conventional wisdom has already hardened around that, forget about it.) In orthodox Keynesianism (perhaps last seen during the Kennedy Administration), tax cuts were the accepted way | Read More »
Fed Chairman Bernanke is giving a speech at London’s School of Economics. Here’s the Associated Press’s headline: “Bernanke: Obama Stimulus Would Lift Economy.” That’s the spin that the average reader is supposed to take away, if they get nothing else. The AP, like every other mainstream press organization, is so convinced that you’re stoopid, that they try to get away with blatantly biased statements like | Read More »
Yesterday, Obama asked President Bush to formally request Congress to approve the second $350 billion tranche of the TARP fund. Bush complied, and sent his letter to Congress last night. This little dance is necessary because Congress split up the $700 billion TARP fund into two halves. The first $350 billion has all been committed or spent now, with the last of it serving as | Read More »
In regard to the virginity-for-sale story recounted below by Paul: this is really nothing but the application of modern technology to a time-honored process that has been part of human culture and anthropology since our ancestors lived in trees. It’s a dowry. Now, it’s important to understand the extent to which modern society has devalued women. Throughout history, the provision of virginity was accompanied by | Read More »
On another thread, you asked the question, Is there a published analysis of the net cost to taxpayers of the TARP plan? Here’s a preliminary draft of one. This comes from two economists at the University of Chicago, and they find a likely net cost (representing a transfer of value from taxpayers to stakeholders of banks) in the range of a few tens of billions | Read More »
Go here to read the latest piece of propaganda for the biggest piece of Keynesian stimulus to be proposed since the New Deal. I and plenty of others have been telling you for days that this whole idea was a brainless, kneejerk response to a critical economic situation. There’s been no apparent analysis of the underlying assumptions, and utter disregard of the decades of experience | Read More »
Historic days lie ahead, and not because the occupant of the Oval Office will soon be of an atypical color. The United States, throughout its early history, has been the only major trading nation to carefully avoid extensive government involvement in economics and finance. We went for more than 100 years without even a central bank (meaning, an official lender of last resort). And when | Read More »
It’s the season for debating the effects of a historic increase in government spending on the economy. The proposal on the table from Obama, is to increase government spending by about $775 billion over the next two years. About $300 billion of this would come as tax cuts of various kinds, and the rest as handouts to state and local governments and pork-barrel spending. Why | Read More »
Sen. Dianne Feinstein made the innocent-sounding but in fact wholly-remarkable statement that the choice of Leon Panetta for DCI is unsatisfactory because the role should be filled by a person with enough experience to understand what the CIA actually does. Wouldn’t it be equally remarkable to suggest that the American people should have elected a President with enough experience to understand what the government actually | Read More »
Everyone’s attention has temporarily shifted away from the automaker bailout, to consideration of a vast Keynesian stimulus program, with some side-distractions relating to the personnel of the US Senate. Don’t worry about the automaker situation: it’ll be back on the front-burner next month as both GM and Chrysler LLC will have burned through last month’s bailout money and will be back for more. A lot | Read More »
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