December 2008
85 posts
TARP Pledges Exceed Limit
I hear that there’s a WaPo article on this, but I’m not a subscriber (all I could find was this Bloomberg video). Apparently Secretary Paulson has pledged almost $10 billion more than he’s been allocated. This bothers me. He claimed he wasn’t going to ask Congress for the additional funds, leaving that task to his replacement. He’s promised money that he isn’t...
New Unemployment Claims Down
Here’s to trying to polish a turd. According to the Department of Labor’s Unemployment Insurance Weekly Claims Report, new unemployment claims are down a seasonally adjusted 94,000:
In the week ending Dec. 27, the advance figure for seasonally adjusted initial claims was 492,000, a decrease of 94,000 from the previous week’s unrevised figure of 586,000. The 4-week moving...
Russia - 6-Year Terms Approved →
— I can’t wait for a 6 year Putin term.
Don't Invest In Venezuela
I found this CNBC article via Mish: Venezuela to seize gold concessions as oil falls:
Venezuela will seize several gold mining concessions that previous governments granted private operators, in a bid to supplement falling oil prices with proceeds from state-controlled gold, President Hugo Chavez said Saturday.
Chavez named no specific contracts or companies to be affected, but his mining...
An Ethanol Bailout? →
— When we need to bail out an industry that only exists because of subsidies, maybe it’s time to rethink the structure of the industry.
Belgian Government Resigns →
— King Albert II has accepted the resignation of Belgium’s government, a statement from the palace said. Maybe it’s my limited experience in world affairs, but do governments normally resign? Also, does the prime minister normally resign alone?
Hoobastank
Is it bad that I want to leave before the headlining band actually plays? The first opening band was awesome. The next two made me want to pierce my eardrums with an ice pick. Beers are 9 bucks for 8 Ozs here. “The Reason?” The reason isn’t you, it’s that I want a refund on the last two hours of my life. Also, still hopped up on cold medication.
Update
It must have been...
Must Read: Fiscal Stimulus
Tyler Cowen has a few articles on the historic success (or lack thereof) of fiscal stimulus. I find these articles extremely informative:
Fiscal policy and the burden of proof
Japanese fiscal policy in the 1990s
Did World War II end the Great Depression?
The punchline: there’s little convincing empirical evidence that fiscal stimulus will help. You might want to read them before you...
1 tag
The age of obligation →
— An economic idea of biblical proportions (with economic armageddon as a possible consequence). Also, gets bonus points for using the phrase “annus horribilis,” which is one “n” away from being hilarious. Did I mention I was hopped up on cold medication today?
Obama Expands Economic Recovery Plan to Create 3... →
Usually I like Bloomberg, but this is terrible reporting. The article highlights the target increase of 2.5 to 3 million jobs, but then goes on to discuss a budget that was revised down from $850 billion to the “$675 million [sic] to $775 billion” range. Now, without substantially changing the mix of programs, I’m not sure how reduced spending will increase jobs created. The link...
GM and Chrysler Will Get $13.4 Billion in U.S.... →
— The most immediate impacts are the boosting of share prices and Paulson asking for the rest of the TARP funds. The longer-term impact is the loss of $13.4 Billion in taxpayer money.
Ratings Agencies Relevent?
S&P once again shows how far into the future they look when determining ratings. From Bloomberg, Goldman, UBS, Deutsche, Morgan Stanley Lowered by S&P:
Goldman Sachs Group Inc., UBS AG, Deutsche Bank AG and Morgan Stanley are among a dozen financial companies whose ratings or outlooks were cut by Standard & Poor’s, which cited rising risks for the banking industry.
“The...
Stupid Stimulus Compromise
southpol:
Earnest question: for the Keynesians can there not be a “sweet spot” that is irresponsible enough but not too irresponsible? Could these sort of comments be part of the ground-softening campaign to make $850 billion seem like a compromise…?
I’m largely basing my characterization of Keynesian economics on Krugman’s blog. I just received my copy of Keynes’ General...
1 tag
Stupid Stimulus Compromise
I found this article from this post. This bit struck me as insanely stupid:
“The biggest fear is that people will do too little,” said one Democratic leadership aide, “like a start-up that fails because it didn’t do enough.”
Obama aides hope to keep the package below the trillion-dollar mark, a psychological threshold that could carry political consequences,...
S&P says chance GE could lose "AAA" in 2 years →
— That’s gotta hurt. Stock down 8%.
Bush considering "orderly" auto bankruptcy →
— I was waiting to see the market reaction to this. There doesn’t appear to be much of a response.
2 tags
Nobody Understands Commodity Trading
I’m seeing a lot of headlines like this: Oil falls below $38 - OPEC cut ignored. I chose the CNNMoney article for a reason. It makes mention that the February contract is the front-month contract starting tomorrow. The February contracts are currently trading for $43.11. If you are a speculator and don’t actually want to take delivery of oil, you sell your contracts before the end of...
“If all the economists in the world were laid end to end, it wouldn’t be a...”
– Peter Lynch
Pay Cuts Coming
Let’s see if there’s a pattern here (all headlines from Bloomberg):
FedEx Cuts CEO Pay, Freezes Hiring as Volume Drops
Motorola Freezes Pensions, Pay to Cope With Slump (same from streetsofchicago)
Hewlett-Packard Said to Be Freezing Pay to Cut Costs
The FedEx announcement also mentions suspension of 401(k) matching. Cuts to retirement matching are stealth pay cuts. Salaries...
Trade-Protection Threat in China, Russia, U.S.... →
— It gets bonus points for mentioning Smoot-Hawley. I don’t know why a government would want to force their citizens to pay more for goods.
Chrysler To Shut Down All Production For One Month →
— Well, that’s one way to survive until the next administration.
Mall Vacancy
This is an important issue. CNNMoney reports on The dead mall problem:
As the recession leaves more retail casualties in its wake, rising store bankruptcies and mall closures could have devastating economic consequences.
As more stores exit malls, vacancies in regional malls could rise past 7% by year-end, a level not hit since the first quarter of 2001, according to real estate research...
California Lawmakers Kill Plan to Raise Taxes,... →
— California’s budget is still a disaster. California has created brand new government departments in the last 5 years. How about erasing them? I know, it’s hard to believe we got by without a Department of Public Health prior to 2007, but we managed. It sounds important, but seriously, how many people knew we didn’t have it in 2005? Will we really miss it?
OPEC Cut Revised
This article claims that the OPEC cuts only amount to a 2.2 million barrel per day cut net from other cuts already announced.
Obama to rape us with ethanol →
muppetpants:
Former Iowa governor Tom Vilsack, a strong proponent of ethanol who made a brief bid for the presidency in 2007, will be named today as President-elect Barack Obama’s nominee for agriculture secretary, a senior Democratic official said.
Vilsack promises to do his best to artifically inflate the price of food while also inflating the price of energy, cause extensive...
OPEC Cuts Big ... Maybe
OPEC has announced a reduction in production of 4.2 million barrels of oil per day. This is roughly twice the amount expected. Russia has announced that they are not going to cut production, though their output has been declining.
I’ve argued previously that OPEC cut announcements cannot be trusted. The incentive to cheat is too great. Kuwait, Saudi Arabia, and others are facing financial...
If You Aren't Scared...
…you haven’t read this.
To paraphrase: with interest rates close to zero and the banks getting paid interest on their reserves, we’re toast.
“Seriously, we are in very deep trouble. Getting out of this will require a lot...”
– Nobel Laureate Paul Krugman, on ZIRP, zero interest rate policy.
The all time low yield on the 30 year long bond...
Just sayin’
Fed Buys Assets, Produces Headlines
The FOMC Press Release was record setting by establishing “a target range for the federal funds rate of 0 to 1/4 percent.”
I checked Bloomberg and found the following headlines on the main page:
Fed Cuts Rate to as Low as Zero, Will Use All Tools
U.S. Stocks Rally, Led by Banks, as Fed Cuts Rate to Record Low
Treasury Yields Drop to Record Lows as Fed Cuts Target to Zero
Fed...
Illinois Pays Four Times Average on $1.4 Billion... →
— Just remember that it still isn’t as bad as California
Special Devices, Auto-Parts Maker, Files... →
— Note that it’s the 11th such firm this year
“What Americans have chosen not to buy, the government is now effectively forcing...”
– Llewellyn H. Rockwell, Jr. — A good quote, though the linked article is a bit further on the right than most who will read this
Downturn Spurs 'Survival Panic' for Some in the US →
— I thought this was going to be about MRE sales. Instead, it’s anecdotal evidence that people are going to steal stuff and do drugs. I kept reading it expecting to find some kind of anti-materialism message from Fight Club. No such luck. So why do I link to it? To remind you to watch Fight Club, because that movie was awesome. Oh, and because I wanted to remind you that stealing is...
Good News, Bad News
Best Buy beat expectations while Goldman missed today. Both opened higher, which indicates one of three things:
Expectations have fallen further than reported,
The market is continuing to ignore bad news, or
Other market news is trumping all.
In short, I think the answer is a variation of 2. But first, let’s look at the news. Bloomberg reports Best Buy Will Offer Workers Voluntary...
For Southpol
I’m not actually much of a supporter of value debates. If I say that I value freedom, and letting winners win and failures fail is essential to freedom, then I apply it to the auto bailout bill, there are two appropriate debate responses. The first is to demonstrate that the bailout bill somehow is more “freedom preserving” than no bailout bill. The second is to argue that there...
“[I]t’s hardly the American way to just let people go bankrupt.”
– Barney Frank
Compare this to the United States Constitution, Article I, Section 8: ”The Congress shall have Power To … establish … uniform Laws on the subject of Bankruptcies throughout the United States.”
Let me suggest that it is, very much, the American way to let people go bankrupt....
FDIC: Failed Bank List →
— Two more bank failures.
Homophone Fun
Does anyone else find it slightly humorous that history’s biggest Ponzi Scheme was the brainchild of a man named made-off?
German bank bail-out has failed, say MPs →
— Ours has too, we just haven’t admitted it yet.
Hypocrite?
I was looking at amazon and they recommended the LeapFrog Crammer as the “Perfect Gift for an On-the-go ‘Tween.” I thought, “What kind of kid is going to play with a pop quiz toy?” Seriously, I claim to place a high value on education, but I would never bring myself to give a child such a gift.
I did give a couple copies of Economics in One Lesson away to people...
WatchTheir explanation of a Ponzi Scheme sounds exactly like the explanation of Fractional Reserve Banking. It works until everyone asks for their money at the same time.
Misrepresentation of Facts
The auto bailout discussion on TV is frustrating. Charlie Gasparino was a complete ass to his guest today. The guest couldn’t get a single word in without Charlie saying how appalled he was that the UAW and the auto companies asking for a blank check. The guest tried to point out several things (like the order of magnitude between the auto and bank bailouts), but never got the chance.
The...
“If we are to save homeowners, should not we first define the term...”
– Frank Beck, in Dollar Devaluation To Fix The Great Recession. The article is spooky, recommending inflation as the solution to all our problems. Way to reward debtors and punish savers. I do like the quote because it shows how arbitrary our rescue efforts are. Where do you draw the line?
Autos to Tap TARP?
Yeah, this was pretty much expected. Yahoo has the AP story White House considering new ways to help carmakers:
The White House says it is considering using the Wall Street rescue fund to prevent U.S. automakers from failing.
President George W. Bush’s press secretary says it would be “irresponsible” to further weaken the economy by letting the Detroit car companies...
Auto Bailout Talks Fail
Bloomberg reports Auto Bailout Negotiations Fail in Senate, Reid Says:
Senate negotiations for a U.S. automaker bailout plan collapsed, in a blow to General Motors Corp. and Chrysler LLC, which may run out of cash early next year.
“It’s over with,” Majority Leader Harry Reid said on the Senate floor in Washington. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant...