Bernanke: "Risk of a protracted slowdown", Supports Fiscal Stimulus
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CalculatedRisk on Mon, 10/20/2008 - 6:14am (331 comments)
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1st
Where's Nemo?
Is Nemo still sleeping?
Wow, I accomplished my major goal in life. Now an empty, pointless existence awaits.
Bring on the stimulus - what's another 170B?
Just a pile of leaves.
And anyone who's still sane should listen to Bernanke exactly why?
Help improve access to credit?? I don't have a job, and I have access to 80K or so just in credit cards!
Another comment that subtracts value.
Outsider writes:
Bring on the stimulus - what's another 170B?
Just a pile of leaves.
Yah, but I could use some leaves on my compost heap. Bring on the leaves.
Maybe they can send it out on some gift cards with cool Christmas themes.
So what's the game plan for a recession? Live like a king when you're sitting on cash?
Forgive them for they do not know what they're doing.
Short
Stimulus.. response.
How about Goodwill gift cards and Thanksgiving baskets all around?
Forgive my comments. One of those days. I'm outta here.
"Meanwhile, "any program should be designed, to the extent possible, to limit longer-term effects on the federal government's structural budget deficit," Mr. Bernanke said."
Do these guys live in the real world or do they think this is some kind of "Second Life" thingee?
Text of remarks:
FRB: Testimony--Bernanke, Economic outlook and financial markets--October 20, 2008
Bernanke says Any stimulus should be "well-targeted," he said, and focused on ways to "help improve access to credit by consumers, homebuyers, businesses, and other borrowers."
In other words, well-targeted means everybody should get their own pony???
How about a home currency printing kit endorsed by the gov't?
No offense, but Bernanke is really wrong about the depression.
it must "help improve access to credit by consumers, homebuyers, businesses, and other borrowers."
What we must do, congressmen, is give these rich bankers a whole bunch of money. A crippling sum of money. Surely this will inspire them with such gratitude that they may start making loans to the people who are no longer credit worthy, whose plight have done nothing about.
Yeah, let's piss mo' money down the hole.
This will help.
Nostrovia,
We haven't been talking about tax policy, but that will have a much larger effect than any puny little stimulus they manage to eke out.
Unfortunately, this being a presidential election year, nobody can talk about taxes except the candidates, and they are permitted to say anything as long as it's not true.
It'll be interesting to see what happens in the 100 days...
These guys really think they can spend thier way out of this mess...
Unbelievable.
Does anybody here personally know anyone who needs and deserves credit, and yet cannot obtain it? Because I have money to loan them!
Comrade Misean, we are trying to take the little capital we have left and we are steering it to the least productive areas, i.e. the bankrupt bubble sector.
Get on with the program, stop complaining and pay your taxes.
Holy Crap, do these headlines get any dumber?
Analyst reaction to Bernanke comments: "For the forex markets the fact that he is now supporting another stimulus plan should be detrimental to the dollar."
So the solution to a credit bubble is to make sure people have more access to credit?
Tim writes:
And anyone who's still sane should listen to Bernanke exactly why?
...to get a good laugh.
(And don`t forget there are other clowns there too.)
Good question about Fed balance sheet.
Bernanke: creates operating difficulties, does not create policy or inflation impact. We're sterilizing.
@Zero
Reducing taxes ... Gasp... that might drive up the budget deficit or make the republicans seem like a legitimate platform!
Honestly the easiest way to get hands into working Americans is reduce wage taxation, unfortunately it's hard to take back when you are done.
Mr. T,
Worse, it's borrow their way out of this mess...
disease: excessive debt, optimistic and opaque accounting (at best)
cure: borrow more, relax accounting rules.
stimulus = strong dollar policy.
watchin bonds. and bucky.
you forgot over-leveraged deposits.
Comrade Peronista,
"Comrade Misean, we are trying to take the little capital we have left and we are steering it to the least productive areas, i.e. the bankrupt bubble sector."
Well that's good news. I thought they were going to piss it away.
Nostrovia,
The FED balance sheet doesn't matter so says bernanke.
I thought they told us that two weeks ago that the 700 Billion "rescue" package would save the economy so why is he calling for a "stimulus" package. How long is congress going to keep listening to these guys.
I think Jas is right.....Americans are dopes....born and bred. And the only way that dopes learn is to get hurt real bad.
How about 7 year moratorium on war and military spending. Reduce our active forces, close bases, make a compact, efficient, fast reponse force.
Unfortunately if this follows the first GD game plan, militarism and conflict will be on the rise. Where to cut? And cut deep?
This will stimulate the economy!!
"Wall Street banks in $70bn staff payoutPay and bonus deals equivalent to 10% of US government bail-out package"
taxpayer dollars hard at work
Wall Street bankers in line for $70bn payout |
Business |
The Guardian
If the FED balance sheet doesn't matter, can we just get rid of the Fed?
Johnny Lee. We are all corporatists now.
"Do these guys live in the real world or do they think this is some kind of "Second Life" thingee?"
It is FOR THEM.
Finance is not my field, but I cannot help but think that destroying the dollar is not the best alternative to a recession.
Ministry of Truth writes:
If the FED balance sheet doesn't matter, can we just get rid of the Fed?
Doesn't matter as in no adverse effects regardless of its ever growing size...lol.
I was putting around the Bank of Canada website to see if there were any interesting items like maybe a disparity in interbank lending rates or realignment of reserves
but I really found nothing interesting. The drop in short term corporate bonds, and corresponding spike in government ones for end of Sept-beginning of Oct was there, but other than that you would have no clue there was a credit crunch going on.
It did get me thinking -- what is the outlook for exchange rates once all governments have finished cutting interest rates?
We have different governments each with a limit to how much of the financial system they can guarantee in the near term and the expectations of growth/interest rate increases in the medium-long term.
One caveat Bernanke forgot to mention. EMPTOR
Mr. T. writes:
...How long is congress going to keep listening to these guys...
You think congress is any better?
I am starting to think that these guys know that we are headed off a cliff and have decided to pull a Thelma and Louise.
They know we can't stop so might as well put the pedal to the metal and have some fun before it's over.
CR - How are your stress factors turning (TED et al)?
Mr. T, you saw the blog Naked Shorts this morning, I guess.
Give everyone a ladder of term CDs totaling $2000 distributed on deposit to the 9 chosen surviving banks.
1yr 2.75% $1000
9mo 2.00% $500
3mo 1.50% $300
1mo 0.50% $200
The results are threefold. Our apparent savings rate skyrockets, the banks are reliquified and cost of funds are reduced.
anonymous....honestly I haven't...if you give me a link I will check it out.
This all reminds me of the Cactus Event at Eniwetok, where an 18 kiloton device was detonated in order to make a big crater, and once made, all the radioactive debris was bull-dozed back into the crater, and stabilized with a few feet of concrete slabs the width of the crater.
Money bomb, bulldoze money into crater, pave over crater.
Mission accomplished.
Mish has a good post up...22 states face budget shortfalls with falling tax revenues.
Mish's Global etc.
NakedShorts: Those GM-Chrysler talks in fool
Another comment that subtracts value.
In a deflationary environment, everything subtracts value.
Imagine if money spent supporting troops overseas was instead spent investing in infrastructure, like a revamped electrical grid (highways for power) for instance, employing ex-troops and others.
--
My response to someone's view of Bernanke's policies and ability...
Do I believe the Fed and the government can avoid deflation if they want to? Yes I do. The Fed's balance sheet size is unlimited and Bernanke is highly educated on quantitative engineering of monetary aggregates.
Did he stop inflation from going beyond his 1-2% band? Did he SEE the crisis coming until it was knocking at the door?? BERNANKE IS A MORON. Period. Academics can run the practical world full of Crooks and dopes? Hell, no.
They can print unlimited dollars, and remember that a 20% downward revaluation of all global currencies via the printing press reduces the real principal amount of all consumer debt by 20%. An easy socialistisic solution if they are desperate - with obvious long run moral hazards to currencies.
Pure garbage.
Jas
You either build for the future of build for the past. Building for the future is an INVESTMENT, and building for the past CONSUPMTION. It is the same difference as WHAT YOU NEED vs. WHAT YOU WANT (and no, I am not being phylosphical or spiritual here...simply pure math and good old fashioned fiscal prudence).
For as long as any type of stimuls package is oriented towards daily consumption of more useless stuff (anywhere, in any country), we simply keep going faster and faster into an eventual real financial meltdown.
Methinks that Ben and Hank know we're in deep shit, they will propose many "cures," expecting some won't be approved. Then, they can claim all would have been fine if only Congress had listened to them. Exit strategy of the face saving kind.
Mr. T. writes:
I am starting to think that these guys know that we are headed off a cliff and have decided to pull a Thelma and Louise.
Nice of Bernanke to mention that the fiscal stimulus policy should be kept in check for the sake of budget concerns....
I guess when it comes to pumping up the banks the sky is the limit huh "helicopter ben"...but when it comes to taxpayers giving money to taxpayers....we should be more "responsible".
Unf&*king believable.
The past few months have seen historic levels of redemptions from mutual funds -- more than $57 billion since the start of October from stock funds, and more than $100 billion since Sept. 1, according to TrimTabs Investment Research. That's about 1.8% of the entire stock-fund industry heading to the exits.
That figure is even higher for bond funds, which have seen 2.5% of their assets pulled out in October alone, with redemptions of $35.3 billion, said TrimTabs.
From Marketwatch, this a.m.
Anon...thanks for the link....very funny. Was not aware of that blog but will check it out...
I think we're past the first wave of the credit crunch and now are facing a series of bankruptcies for companies that can no longer re-finance their debt.
(select Output Display: Enhanced, and view the Bankers' acceptances/prime corporate rates for the last years) Rates that were ~5% last year are now 3% which matches the the 2% central bank overnight rate cut during that time.
Granted this is a different country, and that is not looking at lower credit ratings -- but the international financial system is not broken.
We now have to wait and see how government around the world racing to issue new debt to cover their guarantees will play out. The countries whose banks contribute >40% of their GDP will suffer the most in that round, as even solid banks require a government loan guarantee to do business in this new market.
Ah, we forgot Private Equity.
If you default on a CC can they come after your other assets?
Just wondering cause I have a nice big open credit card line that I would like to spend and default on if the SHTF.
Bernanke just said of the credit crisis, "we addressed this problem early rather than late."
I'm speechless.
They can print unlimited dollars, and remember that a 20% downward revaluation of all global currencies via the printing press reduces the real principal amount of all consumer debt by 20%
A download revaluation by ALL currencies by 20% can only be rampant worldwide inflation - no cure at all.
the problem is simply too much wealth in the hands of too few. The ship has tilted past the point where it can be righted. The "many" cannot survive without retrieving some of the cash they lost to the "few" over the last decade. Doesn't matter what asset classes melt down, the unsustainable inequality remains.
Time to add SRS & SDS to the DOW.
fried writes:
The past few months have seen historic levels of redemptions from mutual funds...
I suppose you could view those people as being short the market, and therefore contribute to the upside of a nice head-fake market rally
Even with a big population on the cusp of retirement (and their desired risk profile), I don't feel we have come close to the point where the majority opinion is not to bother with stocks. That happened in the 1930s and in the 1970s, but we have further to fall (say 30%) before they stampede to the exits
I guess Ben does not want to be remembered as the Grinch that stole Christmas.
--
"I think Jas is right.....Americans are dopes....born and bred. And the only way that dopes learn is to get hurt real bad."
Mr. T.,
Unlike some here think I am not happy with any of these characterizations. But, Americans must come to terms with the reality on the ground:
Misery awaits those who pray to false gods (e.g., democracy) and suffer from blind faith in any human institution.
BERNANKE TALKED ABOUT DYSFUNCTIONAL FINANCIAL SYSTEM TODAY. How did it come into existence and thrive on your watch, you moron?
HOW ABOUT THE DYSFUNCTIONAL DEMOCRACY THAT AMERICA DOES HAVE TO-DAY? Why are the same policymakers that created, or allowed, the CRISIS still in power?
Jas
Mr. T. ,
Don't rely on me for this, but in America credit card debt is non-recourse. They won't send a repo man after your stuff, whereas something like auto-financing is a recourse loan secured by the car as collateral and they will send a repo man for that.
They can ding your credit score, and sell your account to a collection agency but they're only allowed to keep after you for maybe 2 years after the last payment was made on that debt.
Demand destruction is accelerating, fiscal stimulus is classic Keynesian medicine. Hope it works.
The Fed could head off an extreme depression like event if the politicians will go along. The results of this bubble popping are going to be real ugly otherwise.
Credit is useless unless there is a productive purpose for those moneys. Shoveling money at consumers does not change the fact that there are few obvious productive outlets for that money.
Bernanke ought to know that. Fiscal stimulus should be target at long-term productive enterprises that the market cannot fund, both because of its myopia and current structural problems.
For shame, Bernanke. For shame.
That's right Bernake, throw another log on the raging bonfire
safe_as_apartments,
I think we can conclude that Bernanke believes that this "stimulus" is in fact productive, you know like snorting coke makes you work faster. That's probably the worst indictment.
The Fed could head off an extreme depression like event if the politicians will go along.
Expecting those that got us into this mess to get us out is pure folly.
Depression dead ahead.
The Fed could have stopped all these bubbles if it wasn't so busy blowing them.
BARTENDER, more drinks! We cannot allow hangovers!!!
Comrade Bear (tj & the bear) writes:
BARTENDER, more drinks! We cannot allow hangovers!!!
Bartender, hand me gun and an aspirin, I have a headache.
Libor dropped for a day..but no follow up....still no cash out there from MMF's or bank lenders except one on friday.
Pavlov's Dog?
PROBLEM..............Throw money
"Hedge funds have taken losses recently, but that's appropriate." -Ben Bernanke
"Stocks Rise as Credit Markets Show Signs of Easing"
Yeah, cuz other than tight credit markets, the economy is fundementally sound.
Nostrovia,
If the stimulus takes the same form as the prior stimulus package, it will do basically the same thing as the bailout. It will be an expensive way to slow down the inevitable. You give everyone a check, they spend it or deposit it. If they deposit it, it is ultimately a stimulus for the banks, right? If they spend it, the government has bought the retail sector another month or two before they experience the fallout from this mess. But they will experience it and it will be ugly.
If they choose infrastructure projects, it will take a while before any impact is observed. It will keep some people employed longer. But those people will not be the people who work in retail, entertainment and tourism, financial services, tech....
Obama's stimulus plan involves sending out a weekly stimulus check to every Amerikan who can then must show up to see their community organizer to sign up for work duty.
Stock Manipulation Probe Launched After Price Spikes (Update2) - Bloomberg.com
U.S. regulators are investigating whether investors manipulated end-of-day stock prices to avoid being forced by their brokers to sell holdings. According to Rob Dawg
The fact that BB can go out in public without body armor is still a surprise, I guess the illusion of wealth is still alive...
Not "dysfunctional democracy" Jas. It's Virtual Democracy and a Virtual Economy. Both are designed by a small elite for the 'born-n-bred dopes.' Each gives the illusion of participation to a plurality of voters/workers while facilitating the hollowing-out of the nation's wealth. All of this is accomplished not by classic conspiracy, but by a confluence of parallel interests and an internal logic--the logic of market fundamentalism. The result, however, is exactly the same as if it were done consciously by an all-evil and all-powerful cabal.
if bernanke and co. fess up to a recession, look out, they underplay everything. It will be at least the mother of all recessions.
even better, I guarantee any additional stimulus will be saved if targetted to taxpayers.
What i suspect next , is huge cash rebates for homebuyers ($10-20,000), while forcing banks to lend to everyone again, since they backstop FM now. Attempt to stop the housing slide at all costs, while making matters worse. They cant help it, thats all they know how to do, make things worse.
What they dont realize is they are always 2 steps behind. Societal mood has changed, consumers are retrenching.
There are few things more pathetic than watching a loser refuse to give up in spite of all evidence to the contrary saying that he should.
I knew this guy once who tried for 4 years to grow a MLM Amway business. He spent thousands on tapes...books...seminars...and crappy Amway products. He was always convinced that success was just around the corner...the next credit card financed Seminar or tape would hold the answers and lead to prosperity. Nobody told him that the business model was flawed.
Bernanke reminds me of that guy.
Obama's stimulus plan involves sending out a weekly stimulus check to every Amerikan who can then must show up to see their community organizer to sign up for work duty.
That kind of silly invective isn't hitting the zeitgeist this time around. Rational arguments are needed, and I don't think the Republicans remember how to do that.
OK, I have a stimulus suggestion: Can Bernanke get my kids some jobs and help pay for their college education?
kthxbai.
Can Bernanke get my kids some jobs and help pay for their college education?
College education is over rated.
Oh, and if Bernanke could get my friend in LA who has been out of work for a year, and pay off his car loan so I don't have to keep sending him money for car payments, that would be good, too.
Bernanke : He is a liar to the core
Mr. T: exactly. Amway is our nation's economic model. Make nothing, sell everything, and employ tons of middlemen, each one kicking-up $ to his or her "supplier." Virtual economy devoid of production. Compare Amway to the financial services industry.
"College education is over rated."
Yep....I would say that for 90% of current students....the cost will not be justified by the supposed benefits.
When everyone gets a degree the degree ceases to have any value.
Well, college may be over rated, but -- they don't have jobs either, so it keeps them off the streets and out of my house.
It's all contained to SubPrime..
We have no expectation that this would enter our financial system...
smekhovo writes:
Another comment that subtracts value.
smekhovo | 10.20.08 - 10:29 am |
smekhovo,
Instead of "value added", I think it's called "value subtracted".
Like this comment. LOL
"Calvin : You can't just turn on creativity like a faucet. You have to be in the right mood.
Hobbes : What mood is that?
Calvin : Last-minute panic."
We can spend our way out of this. Come on everyone, start spending.
Nostrovia,
Salaries need to rise. How is this gonna make salaries rise? How is this gonna help people to be productive? Money could be used to stockpile some food to hand out when people are hungry.
Just wait until we have a one party legislative and executive control and ask how will this help salaries, etc....productivity....
IMF
Iceland asking for $6bn. Pop: 301,931
Pakistan asking for $4bn. Pop 164,741,924
Iceland: $19,872 per capita
Pakistan: $24 per capita
What a world we live in...
EB, humor and satire are very effective tools of communication. There is no doubt that Obama is a socialist. No doubt a patriot and a good American, but still misguided. His policies will reward the poorest performers while cutting incentive for the self made middle class. While using the "wealthy" to build support for his platform. The wealthy are well prepared to weather a socialist period but the upper middle class is not.
What a world we live in...
Iceland would probably get it.
For comparison, the US funded $60bn loan/subsidy/purchase for Switzerland from UBS
Pop: 7,554,661
$7,942 per capita
the bastard still wont use the R word.
what a tool
If everybody (worldwide) has got their hands out expecting to recieve from the money pot who is left to be putting money in?
us bailout package 700 bn
pop?
per capita?
The middle-class: They are going to be lay-offed along with middle-management.
" lawyerliz writes:
Salaries need to rise. How is this gonna make salaries rise? How is this gonna help people to be productive? Money could be used to stockpile some food to hand out when people are hungry.
lawyerliz | 10.20.08 - 11:27 am | # "
I know the heat is off energy prices for the moment, but you could put a hell of a lot of people to work, here, making renewable energy here and retrofitting the country for it, with the hundreds of billions that currently go overseas to people who don't like us much. $100 or $200 bill to kickstart the process, selected taxes on imported energy, and you're there. Along with a lot of new jobs.
Unless they are federal government employees.
I'm trying to hold on to 3:59 or thereabouts, them I'm finished with this crapshoot for awhile
world power project: put the entire world on renewable energy -- that's gotta be worth a few billion, right?
--
Burn-ass-ke keeps supporting short-term stimulus as if the problem would go away when he is booted out after elections.
Americans have a nightmarish system and they will pay the price in prolonged misery. Bad system = bad outcomes. Maybe, we should learn from China now, because China will come much better from the coming global depression created by Americas "dysfunctional financial system," as characterized by Burn-ass-ke today. The Crooks agent didnt say who created it.
Jas
Hey asswipe--I am glad you are keeping your name. It makes me laugh every time I see it.
freud:
at 350Million folks i think that comes to 200 bucks????
Paulson speaks, DOW drops 20%
snake snatcher paulson -- spewing away
Haha writes:
Can Bernanke get my kids some jobs and help pay for their college education?
Mr. T. writes:
Yep....I would say that for 90% of current students....the cost will not be justified by the supposed benefits.
When everyone gets a degree the degree ceases to have any value.
Anyone can 'buy / earn' a degree.
My studies helped me learn how to think. I would have sunk had I started a profession or career right after high school. I needed that 4 year buffer before being fed to the wolves. I now fend for myself quite nicely.
Both of you are correct if the grad relies on the degree as a certificate of upward mobile without entitlement.
However, the degree will be valuable if the undergrad student learns and internalizes that the sheepskin is merely a means to and end. Anyone who tells you differently is trying to pull the wool from the sheepskin over your eyes.
--
Milton Friedmaniac,
We agree on the basics. Details about the nature of the system can vary.
Jas
"Dad, I'd like to have a little talk."
"Um...ok."
"As the wage earner here, its your responsibility to show some consumer confidence and start buying things that will get the economy going and create profits and employment. Here's a list of some big-ticket items I'd like for Christmas. I hope I can trust you to do whats right for our country."
"I've got to stop leaving the Wall Street Journal around."
-Calvin
Nostrovia,
All these new details Paulson is singing into my ear are making me hot.
Bailout is about $2k-3k per head in the USA. Not $200 and not $200,000.
Hank "G...G ggg Get those year-end bonuses crammed in early so they predate the declawed clawback provisions"
I'd like my pony smoked slowly over hickory fire, smothered in black truffles and glazed lightly in spiced acai sauce.
And fries made out of Peruvian blue potatoes, speckled with handground Bolivian black pepper.
thxbai
My kids can feast on beet peels and brown rice, of course.
w, get back to work. You got like 90 days more to screw up the nation. We know you can do it.
Bailout is about $2k-3k per head in the USA. Not $200 and not $200,000.
Milton Friedmaniac | 10.20.08 - 11:43 am
I figured on this right after the 700b was a dud. Families will see between $5-$15k I believe.
I don't know about anyone else but I'll probably spend a fraction of it and the rest will go on what little debt I have.
We need Bush back on the TV telling us to buy something and not to worry everything is under control on his watch.
Bailout is perhaps $4k-6k per taxpayer in the USA.
Dope Brontide, how do you figure $15k? Multiplier effect? Based on what assumptions?
w's number sounds right, based on additions to the 700b.
4k to 6k... YAY Christmas is saved!
Retailers upping prices as we speak...
Dope Brontide, how do you figure $15k? Multiplier effect? Based on what assumptions?
Milton Friedmaniac | 10.20.08 - 11:46 am
per family... not per head
I'm seeing that is pure cost, not stim, because it's going to banks that need to replace the $ lost on derivatives contracts in which counterparties cannot make good. That's all gone to money heaven.
w writes:
"There is no doubt that Obama is a socialist"
Why? because he proposes a small tax cut for people earning under $250K and a 3 point hike in the highest tax rate, making it 39%?
So, If Obama is a socialist for wanting the highest marginal rate at 39%, then what was Eisenhower when the highest marginal rate at the end of his Presidency was over 90%? Was Eisenhower a full fledged commie?
Get real.
Satire is fine in both directions, but good satire is a way to express things that are true.
For what it's worth, EB's dig at Repubs being unable to muster rational argument merits a response. That may be true of the McCain campaign and some others (Rep Bachmann, anyone?), but other Repubs are being quite rational - Sen Lugar, Sen Collins, Sen Hagel, Colin Powell, even Newt Gingrich.
There's a difference between the party as an institution (seems to be crashing and burning) and the individuals in it (some of whom are being shrewd, in very different ways)
The Fed can make money available but it cannot make it go into productive capital assets.
With unemployment rising it is unlikely to go into things that stimulate consumer spending. That leaves speculative investments.
That's how we got where we are today.
Milton, the 4-6k is just a guess as to the 700B broken down by taxpayer not total population. 300 million Americans minus non federal tax paying citizens (~32%) minus children. Throw in Bush's brilliant 1st stimulus and the proposals coming out now and I bet we are nearing 6-8k per actual taxpayer.
College helps keep unemployment dow.
As of 2005, about 20% of adults have a 4 year degree.
Assuming that the average person works 40 years, that just reduced potential employees by about 2% (10% reduction of working years for 20% of adult pop.).
Then figure that there is one college related job for every 20 students (I guessed at that number), another 5% reduction.
So college does help reduce employment in the US by about 7%.
The Great Beard is convinced that the free market will allocate the stimulus checks efficiently.
What about demanding full transparency at banks? If private capital could determine risk, it would flock in.
What about demanding a reduction in leverage ratios?
What about a solution to the CDS thicket?
Naaah. Let's just spend a bit more money and hope it gets better.
Wonder if any Nobel prizes are in Bernanke's future.
Bond Girl --
If they choose infrastructure projects, it will take a while before any impact is observed. It will keep some people employed longer. But those people will not be the people who work in retail, entertainment and tourism, financial services, tech....
Well, the kind of people you hire to build infrastructure will likely spend their earnings in much the same way as those who receive a straight-up handout. And at least with infrastructure projects, the taxpayers get something in return for their money.
I am agnostic on whether the stimulus will "work", but the idea of handing out money in exchange for nothing at all strikes me as utter insanity.
Wally, you assume that most people have enough "money" to pay for basic needs--food, clothing, shelter, heat, transportation. In the U.S.A. something like 15-20 percent of families do not have enough money to pay for basic needs. This despite welfare & etc.
So college does help reduce employment in the US by about 7%.
Gainas | 10.20.08 - 11:51 am
did help, I wold bet that we see those people in the workforce longer now, negating any positive effect on unemployment.
Put another way, handouts like the earlier "stimulus" merely shift consumption from the future to the present. I honestly do not understand how anyone could consider that a good idea.
If we are going to spend our descendant's income today, perhaps we should use it to solve some of their problems today.
"If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, home buyers, businesses and other borrowers," Bernanke said. "Such actions might be particularly effective at promoting economic growth and job creation," he added.
House Speaker Nancy Pelosi has said an economic recovery bill could be as large as $150 billion. Economists have told leading Democrats the plan should be twice the size.
BARTENDER, more drinks! We cannot allow hangovers!!!
Comrade Bear (tj & the bear) | 10.20.08 - 11:09 am | #
What's the use of getting sober
If you're gonna get drunk again.
--Five Guys Named Moe
deficits don't matter....
until they DO
(Of course I meant "descendants' income". Yeah I am still waking up.)
If we are going to spend our descendant's income today, perhaps we should use it to solve some of their problems today.
Nemo | Homepage | 10.20.08 - 11:54 am
Another anti-American pony hater I see!
Do you folks calculating the per capita cost of the bail out think that Treasury will get 0% of its money back?
Your calculations imply a recovery rate of 0%, yet the historic recovery rates for things like the bailout of Chrysler and bailout of the Mexican Peso are somewhat higher than 0%.
w, in all seriousness, all but a vanishingly small percentage of Americans pay taxes, though I grant you that many do not pay income taxes. People with very little income pay no income tax, and corporations with monstrous profits often also pay no income tax. The very rich pay very little--nominal rates notwithstanding. This is all very well documented and not really subject to argument.
how about we spend our decedent's income, instead? we just have to find a ready supply of willing decendents...
"Bailout is about $2k-3k per head in the USA. Not $200 and not $200,000." -
Milton Friedmaniac
"Math is Hard!" -
Barbie
House Speaker Nancy Pelosi has said an economic recovery bill could be as large as $150 billion. Economists have told leading Democrats the plan should be twice the size.
If we get Obama, a huge House Dem majority, and close to a filibuster-proof Senate, I'll take the "over" on a 300B stimulus package.
"In the U.S.A. something like 15-20 percent of families do not have enough money to pay for basic needs."
That has got to be one of stupiderist things I've read on these boards.
I mean this country's poor have an obesity problem.
Nostrovia,
"The beatings will continue until morale improves."
20% is poor
40% is obese.
What a country ours is
Comrade Misean is Dope,
I agree. That 15-20% are richer than most of the rest of the worlds 90%.
geez.
Your calculations imply a recovery rate of 0%, yet the historic recovery rates for things like the bailout of Chrysler and bailout of the Mexican Peso are somewhat higher than 0%.
At least they had real contracts, which had terms!
I am agnostic on whether the stimulus will "work", but the idea of handing out money in exchange for nothing at all strikes me as utter insanity.
Besides the waste and fairness issues, some kind of workfare in infrastructure or even just picking up trash has substantial psychological benefits. People who think they can provide something of value plan better for the future and are more likely to take constructive action than people getting handouts nobody thinks they earned.
House Speaker Nancy Pelosi has said an economic recovery bill could be as large as $150 billion. Economists have told leading Democrats the plan should be twice the size.
Anonymous | 10.20.08 - 11:54 am | #
Are these the same economists who underestimated the cost of this problem in the first place?
I mean this country's poor have an obesity problem.
Maybe, but they are malnourished and uneducated. The food they eat is devoid of nutritional value, but it is cheap.
with these new initiatives, we should be able to ensure 10% are obese, 50% are poor, and 80% are dead.
joe schmoe: It's impossible to know how much the treasury will get back from the bailout because,
a. we don't know what the bailout plan is any more (buy stocks? buy toxic assets? what? Huh?) and,
b. we don't know what the toxic assets--the subject of the original bailout--are actually worth. But we do know that the market was valuing them very low--9%-to-$20% of face value. It is important to recognize that such "assets" are mostly not MBS--bad as they are--but contracts laid on top of the MBS. Those are shadow contracts, with tens of trillions in notional values, and many of them are indeed worth zero.
Since we had tens of trillions in false "money" sloshing around the system, it stands to reason that any bailout would have to replace some, or much, or all of that in order to "restore confidence" and whatever.
We have huge tax cuts coming, an on-going war, systemic global failure and the solution is to print more free money?
I mean this country's poor have an obesity problem.
Lazy. At least put a little more work into it.
greywalk3r writes:
with these new initiatives, we should be able to ensure 10% are obese, 50% are poor, and 80% are dead.
greywalk3r | 10.20.08 - 12:00 pm | #
Indeed, this is true. Lotta ugliness on the way.
Economists have told leading Democrats the plan should be twice the size.
These are the same economists who will then suggest more funding should go for economic studies...
There are Trillions in debt default problems, so a few 100 Billion is like tossing pennies in front of the steamroller
Milton, that is my point above. The middle class is the most exposed to taxation. Thus they are the ones who will cenceivably pay back the governments debt.
The Fed has NOT printed substantial amounts of money yet. The base money supply has gone up by 10% but indications are that has been entirely sucked up by deleveraging and the functional money supply is about flat.
They can't even begin to print their way out of this - it's way too big. They should, however, print a little bit more to keep the money system stable.
I mean this country's poor have an obesity problem.
that is because they buy the cheapest food - stacked with worthless calories - and when they can't make ends meet they cut back on things they should not, such as prescription drugs they can't afford the co-pay on..
Misean, I'm basing this on the poverty rate, adjusted for modern reality. I also spend a fair amount of time in the real world, where actual people labor and consume--instead of posting to this board. I've made quite a few eyewitness observations. My observations tell me that real wages for regular idiots have fallen during my lifetime. Obesity has nothing to do with it--except as a sign of poor health for the working poor.
I mean this country's poor have an obesity problem.
Nostrovia,
Comrade Misean is Dope | 10.20.08 - 11:58 am | #
and color TV's cable or dish,cell phones, dope rims, bling,
There is poor and there is poor...
go to appalachia some time..
No cell phones, no plumbing....
no stores, no need for stimulus checks.. forgotten...
but go to the hood and see the Mercedese, lexus, beemers...
Look at the cell phones? What lan are we on...
At least in GA the lottery is the tax on the stupid and the kids (decedents LOL) make out with hfre college..
w, you are correct, the "middle class" is most subject to taxation, if by "middle class" you mean people earning wages, particularly those under $108,000.
Maybe, but they are malnourished and uneducated. The food they eat is devoid of nutritional value, but it is cheap.
Anonymous | 10.20.08 - 12:00 pm |
Mickey Dees aint cheep...
Their folks are just lazy to shop for the good food stamps and wic covers...
Friedmaniac
Yes, it is impossible to know what % treasury will recover, for the reasons you give and, more fundamentally, the recovery will take place in the future and all anyone can do is predict.
But isn't it at least highly likely that the recovery rate will be significantly higher than 0%?
By highly likely, I mean that the probability is on the order of the odds that most of us will live to read this blog tomorrow?
Unpredictability is feature of all forecasts of the future. That does not mean that all forecasts should posit total losses.
Milton Friedmaniac,
Sorry to be rude, but link a reliable source for your assertions of stuff it.
Nostrovia,
If we are going to spend our descendant's income today, perhaps we should use it to solve some of their problems today.
Hence the desire to funnel moneys to long-term productive uses.
Stop assuming there is a middle class. They just got their pink slip.
70% service sector oriented economy is made up of the class-formerly-known-as-middle-class.
Schmoe: I agree that zero percent overall is too pessimistic.
I have at least 3 clients where were solidly upper middle class, if not almost-wealthy.
They tooks some risks, that with hindsight, they shouldn't have taken, but were relatively modest with their risks. One is still upper middle, because his business is such that it will resist downturns. One has a wife with a good job, and the other is barely mid-middle class anymore. All of them have already lost hundreds of thousands of dollars.
They are the type of small businessmen who are typically the backbone of the economy. The stimulous plan will help them not at all. Now, if there were some good, high paying jobs created with infrastructure development, that might eventually help them.
This is insanity.
This stupid stimulous package will do nothing to help them.
Thread music:
Bruce Springsteen & Jackson Browne - Running On Empty
YouTube - Bruce Springsteen & Jackson Browne - Running On Empty
This stupid stimulous package will do nothing to help them.
lawyerliz | 10.20.08 - 12:12 pm | #
I agree.
Now get me a crash-campaign to build a super-collider, home-grown fusion reactor, and mining operation on Mars...that'll create enough high, mid, and low-level jobs to continue us fretting about pot-holes, and middle-class taxes, and whether we should legalize pot.
/ef
"Besides the waste and fairness issues, some kind of workfare in infrastructure or even just picking up trash has substantial psychological benefits. People who think they can provide something of value plan better for the future and are more likely to take constructive action than people getting handouts nobody thinks they earned."
Back in the '70s when we started being less rich and less secure (with a bang, I might add), there were a lot of people wandering around wondering WTF to do next, and was it their fault?
The old federal CETA problem (Comprehensive Employment & Training Admin) helped a lot. I was a very small part of it. Yes there were politics and there was some corruption. But in the main it got a lot of people on their feet and moving again -- three to 12 months of paid training or limited term employment (with training attached) gave people some time to find direction.
CETA was one good thing to come out of the Nixon years. We could use something like that again if we remember the two things that made CETA work fairly well -- local control to tailor the programs to the needs of the local economy (with federal oversight), and an emphasis on lower-cost shorter-term training that leads directly to employment. And of course, a sustaining income in the meantime.
If Paulson (despite his mindless rhetoric) cared about taxpayer, (a) he would not have proposed TARP, (b) would not have injected capital under give-away terms, and (c) perhaps, most importantly, even under TARP would have proposed one of any number of ways to ensure taxpayers get repaid every penny plus proper risk premium. The probability he will hand out more of taxpayer money by claiming another emergency is higher than the probability that the taxpayer gets any money back. Of course, at some point they will hire someone to cook the books to show that the avoided loss of GDP etc is more than the cost of the bailout. If Bernanke can say that he acted early to avoid a financial crisis, what hope is there?
lawyerliz writes:
I have at least 3 clients where were solidly upper middle class, if not almost-wealthy.They tooks some risks, that with hindsight, they shouldn't have taken, but were relatively modest with their risks.All of them have already lost hundreds of thousands of dollars.
Modest risks and the yhave lost hundreds of thousands. Sounds to me they don't need any help. How much did the tax cuts to the wealthiest put in their pockets? They've had their help already.
It's time for McMansion owners and BMW leasees to go down hard.
Bob Dobbs,
That was a constructive post. Thank you.
More please.
....geeze....It now seems obvious! They are in fact spending everything in the piggy bank before the upcoming summit Bush bragged about with Sarkozy & Barroso -
"Both Sarkozy and Barroso, who stressed urgency, are trying to convince Bush that now is a good opportunity to tighten and better coordinate control of the financial markets. To seek agreement on principles of reform needed to avoid a repetition and assure global prosperity in the future."
We will be eradicating the US dollar. We will be turning them in at any large US bank for replacement with the new world currency.
This whole thing is being orchestrated.
Lawyer Liz always says it better than me, so ditto ditto ditto Lawyer Liz..You live in the REAL WORLD where most of the US population lives.
If this 'new stimulus plan' hurts America as a country, is there another country that benefits to provide the balance that should exist in any transaction?
Or, is this just a reallocation of wealth within the United States, with the potential to break important linkages in the American economy? That is no one wins, even those who get the free money.
I am curious what the White House thinks it is doing floating the plan for a new stimulus 2 weeks before an election -- very odd.
I wonder if there is a reason that there is a renewed interest in John Lindr's Fair Tax Book that is now causing it to be purchased again...
All agree poor and corporations dont pay inocme taxes. All agree that Really Wealthy have shelters. So that leaves 70% of the tax payers, the middle class, will have to support any increase in govt spending.
And all the read my lips no taxes on the middle class will be followed in 6 months with " Well we inherited a mess orse than we knew and have no choice but to raise taxes"... forget paying off the debt....
A smile comes to my face when dems on the finance committees hail the budget surplus during a brief period of the Clinton administration and hint about how that fine stewardship will be repeated under the next dem watch. Amusing to say the least.
Husseinervilles has a nice ring to it.
How much did the tax cuts to the wealthiest put in their pockets? They've had their help already.
It's time for McMansion owners and BMW leasees to go down hard.
Anonymous | 10.20.08 - 12:17 pm | #
Change your name to anonymosity...
(wink)
I know the $5M to $10M-in-the-bank crowd is running scared. But what about the $25M+ club? Are they feeling middle class right about now?
"College education is over rated."
Remember the mantra the past couple decades about "educating students for the 21st century"?
Obviously my gifted nephew didn't get the memo. Poor kid. He majored in chemistry at a top tech school and can't find a job. His guidance counselor failed to introduce him to the great career of cashiering - America's 21 century workforce option. I hear Walmart is hiring.
"Maestro....." Nancy Pelosi to Barneyt Frank on passage of the 700- woops 850 BB dollar bailout bill and the 700 point rebound since wiped out...
rdrdrr
The Fed's assumption is broken. We do not need to to stimulate consumption. We need to stimulate savings and investments. And we do that how? Miserable savings interest rates and usurious small business investment rates.
bearly,
A smile comes to my face when repubs on the finance committees hail that budget deficits don't matter.
outsider, i am hiring Chem degrees...
Milton, what about those making 150-200k? Dual income, maybe college educated. They are the ones who are about to get thier backs broken. Obama tax plan looks great. Tax the wealthy more, everyone else less. I like the way his plan looks compared to McCain cutting taxes on everyone especially the wealthy. However, I wonder how much of those wealthy will suddenly earn less as they take less wealth out of their assets and now that the stock market and real estate have tanked. Many of these formerly wealthy ae not so wealthy now. The problem I see is that the inflection point of who pays and doesn't pay in Obama's plan is around 225k right now. With the huge increase in spending Obama is proposing and less taxes from the wealthy I would bet his inflection point drops to somewhere closer to 150k. Please note, that I am very displeased with McCain, but fearful that people think Obama is somehow the solution.
halbhh writes:
Imagine if money spent supporting troops overseas was instead spent investing in infrastructure, like a revamped electrical grid (highways for power) for instance, employing ex-troops and others
Call me crazy, but Korea (South) has one of the most advanced tech savy societies. And yet they are about to go IMF begging. Some hyperbole here, bu the idea that "infrastructure" is a panacea is pure fituion. States are selling assets. This will work well. We can allocate fed money to states to spend on infrastructure then they can sell it to MAquarie who purchases it using massive leverage whcih is then sold into the lev loan market (perhps even some CDOs)...rinse wash repeat
Husseinervilles has a nice ring to it.
bearly | 10.20.08 - 12:20 pm | #
No. It doesn't.
Re: I hear Walmart is hiring.
Actually, they are cutting back and need less than 200 people per store, but perhaps you relation can obtain a credit card.
Hey UB!
OT...
Southland home sales up, prices down; foreclosures now half the market
Southland home sales up, prices down; foreclosures now half the market
October 20, 2008
La Jolla, CA---Southern California home sales shot up by an unprecedented 65 percent last month from the dismal, record lows of a year ago, when a credit crunch slammed the brakes on home financing. September sales also posted a rare gain over August as price cuts lured more buyers. Foreclosure resales rose to half of all transactions.
A total of 20,497 new and resale houses and condos closed escrow in the six-county Southland in September, up 5.8 percent from 19,366 in August and up 64.6 percent from 12,455 in September 2007, according to San Diego-based MDA DataQuick, a real estate information service.
Last month's sales were the highest for any month since December 2006 and the year-over-year gain was the highest for any month in DataQuick's statistics, which go back to 1988. However, last month's sales were still the second-lowest for any September since 1996 and were 17 percent below the 20-year sales average for that month.
...
Malcolm X the Owl - Gotta link?
Bob Dobbs | Homepage | 10.20.08 - 12:15 pm | #
I'll second blackhat's comment: That was a constructive post. Thank you.
What I'm having difficulty with is exactly what Bernarke is suggesting.
How can a stimulus be "well-targeted" and focused on ways to "help improve access to credit by consumers, homebuyers, businesses, and other borrowers" while at the same time " . . . designed, to the extent possible, to limit longer-term effects on the federal government's structural budget deficit?"
I haven't seen any comment even explaining what Bernarke is saying (before criticizing it).
Anyone out there know what he means?
"Imagine if money spent supporting troops overseas was instead spent investing in infrastructure..."
It'll all be fun and games until Iran marches to the Mediterranean and cuts the West off from mideast oil.
We will be eradicating the US dollar. We will be turning them in at any large US bank for replacement with the new world currency.
This whole thing is being orchestrated.
Black Star Ranch
okay. so... any guesses as to how many frobbos we'll get for an old dollar?
Nemo writes:
Put another way, handouts like the earlier "stimulus" merely shift consumption from the future to the present. I honestly do not understand how anyone could consider that a good idea.
If we are going to spend our descendant's income today, perhaps we should use it to solve some of their problems today.
I'm not against infrastructure spending per se, or borrowing for anything that actually has a useful life, but it does reduce fiscal flexibility (which is more or less a joke right now) and will be another drop in the bucket of what will end up being a tax increase during a recession. Of the two options, it is certainly the better one.
My point is that neither of these options will really help with the core problem, which is the realization in practice that Americans (and Western Civilization in general) needs to start living within its means. You can't stop the contraction associated with that.
aNonna: Morning, Pilgrim.
Malcom: You noticed that "Maestro" too, huh.
w writes:
Milton, what about those making 150-200k? Dual income, maybe college educated. They are the ones who are about to get thier backs broken. Obama tax plan looks great. Tax the wealthy more, everyone else less. I like the way his plan looks compared to McCain cutting taxes on everyone especially the wealthy.
The very people that are underwater on their houses but making payments monthly and on time, paying their CC and auto's. The same ones that were hit with the AMT, but that Frank says shouldnt pay the AMT, but proposes reducing the Home Mortgage Deduction to pay the difference lost in the AMT...
circular illogic i say!
Thanks mainstreet. You missed the point anon.
These guys are NOT going to starve. But they aren't going to be hiring anybody any time soon, either.
What I was proposing that potential customers of theirs be enabled to get good jobs, so they could spend their money will my clients.
A MoneyPrintingPrestidigitizer for each American....that's the ticket!
The more you print, the bigger it gets and the more heat it produces. Free heat for every domicile, tested and based on the perpetual free money principle engineered in the U.S.A.
It'll all be fun and games until Iran marches to the Mediterranean and cuts the West off from mideast oil.
Gotta be one of the dumbest comment here yet.
outsider,
They need to put their resume into the Navy CHART. It's the system we pull all lists for interviews from.
They can google it. If they are willing to relocate to the MD/DC area. We will work out a way to get them in front of me.
I wonder what Kathleen Brown calls herself on the blogs.
@w
FAO Schwartz had a good term for them...
"Aspirational Luxury Consumers"
Fred,
It's an insightful point that in fact over the last decade States have in fact been selling assets, that is assets that are owned by taxpayers to private and often private-foreign companies, who turn-around and make a profit off of those assets--ie toll roads and other large formerly public infrastructures (think ports and other causeways). But, to say that infrastructure spending itself is 1) panacea, and 2) fictitious is hyperbole. Take your pick of a declining 2nd world economy (Russia) or a Third world-economy, pick your Sub-saharan country. It is primarily because of lack of infrastructure investment that commerce cannot blossom, is impeded, or simply cannot exist beyond a few local markets. The economic case for good infrastructure is not over-stated--not a cure for every economic woe, but a necessity and in particular for US.
From way the hell over at Across The Curve, comes this here set of words:
[hat tip]
FYI: The Treasury and the taxpayers need to pay for the bailout and since each group eschews tax increases or spending cuts the capital markets will become very busy as Treasury raises funds. This week Treasury will announce the reopening of a 5 year TIPS bond as well as 2 year notes and 5 year notes for auction next week.
The 2 year note and the 5 year note issuance could total as much as $35 billion 2 year notes and $25 billion 5 year notes which be the largest issuance of those securities since the dawn of human history.
There are several anecdotal items worth noting, I think, regarding the state of the economy.
The Wall Street Journal is noting in this mornings edition that these are less than festive times at American Express. Delinquencies are rising and loans delinquent by 30 days or more has climbed to 4.1 percent from 2.5 percent a year ago.
The Journal also reports that Yahoo and Circuit City are planning job cuts and Hollywood has retrenched on the cinematic front.
Milton Friedmaniac writes:
joe schmoe: It's impossible to know how much the treasury will get back from the bailout because we don't know what the bailout plan is any more (buy stocks? buy toxic assets? what? Huh?)
Excellent and a point that could s=use far more emphasis by the punditocracy, regardless of political stripe
watching the Jeff Immelt (GE) interview with Cramer (Mad Money)...is this publically available yet? I got the link off the company intranet...
What blackhat said.
If they choose infrastructure projects, it will take a while before any impact is observed. It will keep some people employed longer. But those people will not be the people who work in retail, entertainment and tourism, financial services, tech....
Bond Girl
But at the end we'll have productive assets! Way better than buying crap from china....
Hehe, Navy website is not trusted by google chrome:
"You attempted to reach chart.donhr.navy.mil, but the server presented a certificate issued by an entity that is not trusted by your computer's operating system. This may mean that the server has generated its own security credentials, which Google Chrome cannot rely on for identity information, or an attacker may be trying to intercept your communications."
I wonder how the Navy feels about google chrome.
On topic: Yes, thaw. Yes free fall.
What do you mean Dope?
These are the people who went to school, did what they were told, made good decisions and got gainful employment. They are the class we want to expand in America. They are not wealthy, just middle class. Sure they (I) spend too much at Toys R Us for Christmas, but they worked hard for that privelege. And, they followed the rules.
uncle Billy..yeah hard to miss..knew it would bite her, but forgot the media...
Anonymous: Gotta be one of the dumbest comment here yet.
Are you my brother? Are you wearing your Che' t shirt?
Sportsfan easy:
help improve access to credit by consumers, homebuyers, businesses, and other borrowers" while at the same time " . . . designed, to the extent possible, to limit longer-term effects on the federal government's structural budget deficit?"
You see the CC comapnies have actually screwed themselves with their on BK bill and the old addage you cant bleed a turnip comes to mind.. but yet they do not have the liquidity to cover their writeoffs.
So the stimulus package will allow for some of these people to pay 2K to the CC companies to keep their mediocre FICO ...
And that in turn gives Cap One liquid injection, thereby not needing the same injection from the Fed or Treasury
Bond Girl --
My point is that neither of these options will really help with the core problem, which is the realization in practice that Americans (and Western Civilization in general) needs to start living within its means. You can't stop the contraction associated with that.
I agree, and this seems perfectly obvious. So how come the long bond only yields 4.3%?
$10 trillion in debt, a contracting economy, deficits on track for $1+ trillion... And still the world giving us long term loans at savings account rates. Why?
And is it really such a bad idea for our government to take advantage of it?
Well, the local Mall here and WalMart was jam packed all weekend. It was so busy, it was similar to say, the weekend after Thanksgiving weekend for Xmas shopping. Lots of retailers heavily discounting. I asked several clerks what was up, and was told basically that people were "doing Xmas shopping now". Got some other replies about credit limits being lowered on cards and that many were charging up before they got cut off. It will be interesting to see what the weekend after turkey day is like.
I agree, and this seems perfectly obvious. So how come the long bond only yields 4.3%?
Flight to quality?
Blackhat
Bullseye. Infrastructure is a necessity. If you don't want it, then you don't want a competitive modern economy. Invest or go out of business. Simple as that.
Misean:
Not rude, but not very ambitious. I've got to get back to work.
Here's a link to the U.S. Census table describing everyone at or below 150 percent of the official poverty line.
The figure is 33.0 percent.
Poverty 1--Part 150_01
Why 150 percent of "official" poverty? Because the official poverty line is based on the cost of food. In 1965, when the measure was designed, food was typically 33 percent of a family's budget. Now it's like 10 percent. So if you base the official poverty line on the cost of food, you are cutting the figure down by about two-thirds.
Poverty in the United States - Wikipedia, the free encyclopedia
The reality that many people counted as "poor" based on this measure are actually not because they have uncounted sources of income (mostly from under-the-table work and from the drug economy) does not ameliorate the fact that many more poeple--folks with regular jobs making $10 and even $20 an hour--do not have that extra income and do not receive welfare. Many of these people are absolutely impoverished.
A woman with three children in Baltimore has to earn less than $22k to fit the definition of "poverty." Rent for a two-bedroom place with working heat is something like $800. Heat & light is another $200 per month. Food is $600 per month at minimum. Clothes and transportation to work is extra. We'll say $64 for a monthly bus pass and $100 per month to clothe everyone in the house. Let's give her a $14 per hour job at Hopkins, and 40 hours per week. She grosses $29,120 a year--50 percent above the poverty line. After taxes she's at about $24k per year. Call it $2000 per month. Now let's subtract $1764 from her $2000 income, and look! She's got $236 per month to invest in her 401(k). But wait. What did we forget? Oh yeah, health insurance. Typical plan for a family of 4: $12,000 per year.
Error | National Coalition on Health Care
Looks like she might be poor after all, official stats notwithstanding.
A short-term stimulus can be useful for a "traditional" recession where the driving force is excessive inventory. If a stimulus sucks up most - but not all! - of the excess inventory it can permit a more controlled and efficient reworking. But we're facing a credit crunch and snapping some product off the shelves does virtually nothing to alleviate the real problem of too much debt and too much of the wrong kinds of goods and services. The best stimulus for out current problems is long, steady, and geared at productive activity to maintain and rework our economy.
Malcolm X the Owl - Thx. Passing info along.
Malcome X the Owl writes:
So the stimulus package will allow for some of these people to pay 2K to the CC companies to keep their mediocre FICO ...
Okay, got it. We each get to identify a CC company to be named as payee on our bailout check.
What a plan. Bernarke could be in Nobel territory here.
It'll all be fun and games until Iran marches to the Mediterranean and cuts the West off from mideast oil.
Projection much?
The last time Iran invaded anyone? 479 BC
U.S military actions just since 1890
Iran will collapse under its own weight soon enough. Sooner if we stop giving them a common enemy to use as glue to hold things together.
outsider,
By "we" i mean you and i will find a way to get in touch. Once they put resume into chart you can let me know. And i will tell you off line what to do. They may needd to go through USA jobs and get the link to chart that way. They would be applying for 0819, 1301 jobs for navy and open continuous in MD cities.
a-mous,
Husseinerville was funny. It was.
A short-term stimulus can be useful for a "traditional" recession where the driving force is excessive inventory. If a stimulus sucks up most - but not all! - of the excess inventory it can permit a more controlled and efficient reworking. But we're facing a credit crunch and snapping some product off the shelves does virtually nothing to alleviate the real problem of too much debt and too much of the wrong kinds of goods and services. The best stimulus for out current problems is long, steady, and geared at productive activity to maintain and rework our economy.
Hear, hear!
W, the people wouldn't vote for anyone that offers a real solution. Everyone wants someone else to pay. It will take some serious problems to effect most everyone in the country for anything to change that.
So Cal Home Price plunge continues....
DQ News California Home Price Appreciation Tracker
Nemo
Absolutely. The country needs infrastructure, fiscal stimulus, and probably will need some expanded relief efforts in the next couple of years. The Fed Govt can borrow long term at a fixed interest rate of 4.5%. That is a good deal for financing things that are necessary.
In contrast, Bush needlessly ballooned the deficit by cutting taxes while paying for things that were not only not necessary, but disastrous (Iraw War).
Good policy vs bad policy. Sometimes it is easy to tell the difference.
Infrastructure: Keynes liked it. Krugman likes it. Goldman Sachs loves it.
Kona, we're not making a lot of money with the ratings biz, are we. I say we put together a glitzy website and go into "business intelligence." Certainly pays better than blog commenting.
Fred writes:
States are selling assets. This will work well. We can allocate fed money to states to spend on infrastructure then they can sell it to MAquarie who purchases it using massive leverage whcih is then sold into the lev loan market (perhps even some CDOs)...rinse wash repeat
Well, not exactly. First of all, there is a limited amount of infrastructure that is actually changing hands in that manner. Second, those companies will be affected by credit availability like everyone else - they may be increasingly difficult transactions to do right now. Third, those companies are looking at the cash flow the infrastructure can generate. If users are overextended financially, they will find alternatives if the costs are too much for them to handle. Politicians would not want to touch that situation. Look at the plans with the New Jersey turnpike, which is not the same thing, but it is similar in that the politicians were thinking monetizing infrastructure and massive user rate increases was the solution to the state's money woes. Raising rates isn't exactly working out so well for them now.
Could you make my Stimulus in Gold or Silver coinage please.
sportsfan...
Kinda, except its trust... you see they could send to us with the CC name on the check and we endorse, but that will hardly win high praise ferom the Dumb American that you se on the 11 oclock news that says "oh i'd pay off acredit card " then actually goes to best buy and gets a HD TV...
So 60% will go to CC companies and , like airplane capacity, thats enough, the rest goes into the economy through HD TV purchases....
The best stimulus for out current problems is long, steady, and geared at productive activity to maintain and rework our economy.
To which I'd like to add...
The powers-that-be seem to have an unwavering belief that the market system is the best allocator of capital. I find this assertion questionable, as we've seen too much short-term thinking in all sectors of the capital markets.
Governments have a role to play in funneling money to long-term productive uses that the market doesn't pursue.
From Acrossthecurve: "One trader said that the competition from the FDIC guarantee has been a real wet blanket for the entire sector and there is no active marginal buyer. So spreads can worsen from these levels and there is no rush to pick a bottom."
Also see: You are certain that the credit crisis is cutting into normal life when you tune to CNBC and see Rosa DeLauro (D-CT) ranting from the podium of the House Committee on the Budget.
Shortages You Never Expected - Dealbreaker - A Wall Street Tabloid - Business News Headlines and Financial Gossip
borkafatty writes:
Could you make my Stimulus in Gold or Silver coinage please.
Only if you promise to spend it. That's the purpose of the stimulus, to make the next quarter's numbers look good.
These guys are NOT going to starve. But they aren't going to be hiring anybody any time soon, either.
That's right lawyerliz and we are also smart enough to stop spending which will result in less stimulation of the economy!
Time to start saving again.
Milton Friedmaniac | 10.20.08 - 12:38 pm |
Except she can get housing subsidy and food stamps... so back out half of rent and 3/4 of food...
Fair Economist,
I think its a misconception that the Fed will try to print, "to get ourselves out of this." Frankly, its a bit of a straw man presented by deflationists. "Printing won't work," they state. As if anyone argues that will.
Here's a revolutionary idea. The purpose of printing money is not to juice the money supply or replace lost credit. No, the purpose of printing money is to affect velocity.
The money supply is irrelevant when velocity is plunging. Any increase gets gobbled up by deflationary expectations.
So the purpose of printing is to threaten those who hoard currency with a penalty. This is a classic game of "chicken".
"Keep hoarding and we'll print, even if it risks hyperinflation," cries the Fed.
"You'll never resort to that!" reply the hoarders.
The Fed can and probably win this game of chicken. They will do it because they honestly don't think we'll ever end up with hyperinflation. Just ask blogging economists like James Hamilton on Econobrowser. He reflects mainstream thinking when he says that the Fed can simply "reverse policy" once the economy improves.
I also don't think infrastructure is necessarily the answer. It depends how forward looking it is.
Public transit? Energy alternatives? Perhaps good long-term.
Repaving roads and rebuilding bridges? Questionable.
We are not going to bypass the present problems with spending, there will need to be bankruptcies
blackhat writes:
I didn't say no infrastructure spending. We get infrastructure spend ing every year ion the form of the Higheway and or Dept of transport budget. And we go on to spend money on retrograde projects that are the exact opposite of what you and schmoe suggest is requisite for future growth. I am left perplexed as to how rebuilding the 59th street bridge is value accretive to gen Z? Having followed the FCC for a while I am accustomed to public interest arguments which is whhat this neo deal suggestion is after all. I'd be curious as to what you believe are the worthwhile infrastructure investments we should be making. I could see a justification for infrastructure surrounding a new energy paradigm (thinking gas stations for electrics) for example but how can we make that decision when we don't have the technology and or market evolved enough? My point is basically that what we will get is a sop to broken companies like GM etc..with some nbridge building thrown in possible some seed money for silicon valley. How about R&D grants instread that would let the market instead of some backward looking retard in DC.
David, any relation to Nathan?
safe,
I'm all for alt energy. i think alot of bridges are in total disrepair and need fixing.
Anything is better than giving joey plumber a free twelve hundo for bud heavies.
.....
w writes:
Milton, what about those making 150-200k? Dual income, maybe college educated. They are the ones who are about to get thier backs broken.
=
I've got a few relatives in that bracket, w. I'm not weorried about them and they ain't too worried about themselves. The reason? Because if you make $150k a year in the U.S.A. you can live a beautiful, safe, clean lifestyle at $90,000 and bank the rest. They didn't buy too much house, too many cars, or take crazy risks in the market. The wife clips coupons and shops at Wal-Mart. The husband collects guitars but does so within a set budget. They pay serious taxes but they also have enough money to feed the kids (all 4 of 'em) and put away quite a bit. I would rather tax people in the $500,000 and up bracket, but people at $150k are in the top two percent or earners and are OK for now. The taxes ought to be focused on the top one-tenth of one percent, and they should be confiscatory, in my opinion. Here's the best graph of U.S. income distribution I've seen.
The L-Curve: A Graph of the US Income Distribution
Anyone can find me a human who is actually, intrinsically worth $3 million per year or more? Make the argument, please.
Before I forget, this might prove to be entertaining:
http://calendar.columbia.edu/sundial/webapi/get.php?vt=detail&id=26673&con=embedded&br=ais
Nemo,
That is exactly the logic municipalities have been using to date. Epic municipal volume in the past few years as rates have remained at historically low levels. What does their market access look like now, especially for the largest borrowers? But they have the benefit of being able to beg the federal government for assistance when they have trouble.
I do not think the market-imposed ceiling on federal debt is right around the corner, but it is silly to spend like it doesn't exist.
look, i think there's a real growth opportunity staring us in the face: graveyards and other grave-related products -- like grave ships and grave gravy. what do you guys think?
We are not going to bypass the present problems with spending, there will need to be bankruptcies
EvilHenryPaulson
How about bankruptcies AND spending.
The 9 dark banks will be protected.
One Fed to rule them all.
Re: glitzy website and go into "business intelligence." Certainly pays better than blog commenting.
UB, the value of just another website is meaningless. I have contemplated many times if there is any value in doing a web page, but I keep coming back to the fact that there are millions of sites that just clone off each other and provide nothing of value, except to steal information that someone else thinks is important. I do it all the time, but at some point the value of information decreases, thus you need to be able to tap into an informational product that goes beyond copy/pasting news stories and then having people then beat that dead horse to a pulp. "Our" very own mp is kind of on the right track with offering a downloadable product, which has a theory about a topic, but of course, to get that theory you need to connect dots with old information.
I guess now is not the time to talk about Mandelbrot structure -- oh well, sure it is, well, maybe not...
"The Fed can and probably win this game of chicken. They will do it because they honestly don't think we'll ever end up with hyperinflation. Just ask blogging economists like James Hamilton on Econobrowser. He reflects mainstream thinking when he says that the Fed can simply "reverse policy" once the economy improves."
This is the same fed that drove us into the cul de sac. The idea that thee guys have control is the first fallacy in your logic. Everything else follows.
Investing in education, especially at the community college level which reflect the local business needs would IMHO represent a better ROI than throwing money down the retail rathole.
The money supply is irrelevant when velocity is plunging. Any increase gets gobbled up by deflationary expectations.
Ah yes, MV=PQ. That's probably why infrastructure spending would help-forced movement of money.
Except she can get housing subsidy and food stamps... so back out half of rent and 3/4 of food...
Malcom, actually she can't. She's over income and the wait list is about five years long, last I checked. Then too, anyone who wants a decent life in Balto will avoid section 8 places. Too shabby and dangerous, most of the time.
It's a great time to be a bum.
safe_as_apartments writes: Governments have a role to play in funneling money to long-term productive uses that the market doesn't pursue.
Yes. And government steps in to assume the risk when the outcome appears too risky for commercial markets, or when the logistics is particularly daunting (Atom bomb/ Moon-landing). Very few commercial entities can or would engage in a decade long project that amounted to expenditures of hundreds of billions of dollars. o.k. none. But long-term payoffs require these expenditures of capital/labor. The prosaic question is whether or not government makes good or bad investments (or none)?
Turmoil May Make Americans Savers, Worsening `Nasty' Recession
Turmoil May Make Americans Savers, Worsening `Nasty' Recession - Bloomberg.com
Oh woe be all if this happens.
lawyerliz writes:
I have at least 3 clients where were solidly upper middle class, if not almost-wealthy.
They tooks some risks, that with hindsight, they shouldn't have taken, but were relatively modest with their risks. One is still upper middle, because his business is such that it will resist downturns. One has a wife with a good job, and the other is barely mid-middle class anymore. All of them have already lost hundreds of thousands of dollars.
The hit on assets, RE,Bonds,preferred shares,equity are all part of the wealthy lifestyle which is to say this recent downstoke in the economy has impacted the upper part of the financial food chain in a greater way that has been discussed. Debt destruction is also eroding the payment stream on interest payments another crux for the wealthy lifestyle.
Kona: glitzy website was tongue in cheek. No no no, I'm talking about custom intel. Blankfein calls you up and wants to know if the bananas are spoiling on the docks sort of thing.
She's got $236 per month to invest in her 401(k). But wait. What did we forget? Oh yeah, health insurance. Typical plan for a family of 4: $12,000 per year.
If she works at Hopkins, she prob has great health insurance.
The prosaic question is whether or not government makes good or bad investments (or none)?
blackhat,
In my mind, this is wear leadership and judgment comes in. Easier said then done, of course. And some government expenditures will turn out to be duds.
SoCal home sales in Sept up 65% yoy. half are reo
I think that Ben is extremely jealous of Krugman's win and wants one for himself without considering what is good for the general population of this country.
A woman with three children in Baltimore has to earn less than $22k to fit the definition of "poverty." Rent for a two-bedroom place with working heat is something like $800. Heat & light is another $200 per month. Food is $600 per month at minimum. Clothes and transportation to work is extra. We'll say $64 for a monthly bus pass and $100 per month to clothe everyone in the house. Let's give her a $14 per hour job at Hopkins, and 40 hours per week. She grosses $29,120 a year--50 percent above the poverty line. After taxes she's at about $24k per year. Call it $2000 per month. Now let's subtract $1764 from her $2000 income, and look! She's got $236 per month to invest in her 401(k). But wait. What did we forget? Oh yeah, health insurance. Typical plan for a family of 4: $12,000 per year.
Error | National Coalition on Health Care
Looks like she might be poor after all, official stats notwithstanding.
Milton Friedmaniac | 10.20.08 - 12:38 pm | #
Why the hell did she have 3 children? Sounds like a personal problem to me--definitely not my problem. I could not afford kids, so I did not have any.
Malcom, actually she can't. She's over income and the wait list is about five years long, last I checked. Then too, anyone who wants a decent life in Balto will avoid section 8 places. Too shabby and dangerous, most of the time.
Milton Friedmaniac | 10.20.08 - 12:52 pm
MF,
Trust me, I moved to MD in 2004 from ATL , left a nice house in a great burb that was 133K, got here in August and NOTHING was available in MSA for under 417K..
Inlcuding section 8... Started renting, still renting. Though it is getting better.
And i was that lady 8 years ago. I made 29K with a kid and a teacher wife who stopped working to raise the kid...
Still had the bills, though. A lot is about choices. Like choosing not to live in Sec 8 ...
Part of me understands... but i hope we all agree this lady would be better off knowing how to fish rather than standingin line waiting for the govt fish truck to pull up...there is a happy medium somewhere.
Once the economy falls into liquidity trap as it is now, only fiscal stimulus can have real bites.
People, this is Helicopter Ben at his finest.
Maybe, BenBen should have let the White House and Congress talk about the initiative first. Then, he can endorse the initiative.
This looks like BenBen is running the federal government fiscal policy.
Permits for children? Licensing required to give birth?
faireconomist "A short-term stimulus can be useful for a "traditional" recession where the driving force is excessive inventory"
Precisely. It makes me wonder why Bernanke wouldn't suggest how to best direct the stimulus today. Is he that shallow ?
Why the hell did she have 3 children? Sounds like a personal problem to me--definitely not my problem. I could not afford kids, so I did not have any.
Anonymous | 10.20.08 - 12:59 pm
Where are the child support payments? You can't tell me they are 0.
Zero, we have a problem with a yield curve that is structured to not hit zero; until we come to the realization, as a society, we will increase our debts infinitely.
Re: "Some supersymmetric theories require a cosmological constant that is exactly zero, which further complicates things. This is the cosmological constant problem, the worst problem of fine-tuning in physics: there is no known natural way to derive the tiny cosmological constant used in cosmology from particle physics.
One possible explanation for the small but non-zero value was noted by Steven Weinberg in 1987 following the anthropic principle.[5] Weinberg explains that if the vacuum energy took different values in different domains of the universe, then observers would necessarily measure values similar to that which is observed: the formation of life-supporting structures would be suppressed in domains where the vacuum energy is much larger, and domains where the vacuum energy is much smaller would be comparatively rare. This argument depends crucially on the reality of a spatial distribution in the vacuum energy density. There is no evidence that the vacuum energy does vary, but it may be the case if, for example, the vacuum energy is (even in part) the potential of a scalar field such as the residual inflaton (also see quintessence). Critics note that these multiverse theories, when used as an explanation for fine-tuning, commit the inverse gambler's fallacy."
Oh come on UB, maybe you were up too late last night!
Re: "Licensing required to give birth?"
If you think I'm going to work my ass off and get the shit taxed out of me to support these insolvent banks and your inflation is growth policies you are full of crap Benny boy.
...the deficit can not be paid, our people have no money to spend, we need to spend to support the economies of China & Japan. If they have cash flow problems or think we are no longer a good gullible customer, they cash in our US Bonds - they do that and it's bye bye US & US dollar!
I'm guessing the best investment to make nowadays would be to pay for an acre with electric and water - a place to park your RV and grow your own garden with clear lines of fire. $45K cash will about do it here.
Not advocating it Kona. It's certainly not a popular idea. It smacks of fascism. But pumping out babies and letting others take care of them is a form of fascism too in a way.
Uncle Billy, Adenoid writes:
Permits for children? Licensing required to give birth?
next amendment to the constitution: right of replacement.
FYI: "In normal times, the single worst week to own options is often this one. The first week of a 5 week expiration cycle."
Blogger: Redirecting
Because if you make $150k a year in the U.S.A. you can live a beautiful, safe, clean lifestyle at $90,000 and bank the rest.
but then there is the problem of those that were making 90K and so forth on down hill....
At what point do we decide to stop being income productive? Yeah i can live on 90, but those that were living on 90are now living on 50-60?
Plus MF, the truth is I make 150K and i do live on 90K... the other 60K i never see..IT baby!
UB,
Remember Obama already addressed the too many children issue being the only one to vote for out of the womb abortions... he didnt specify an age limit i dont believe...
Why don't we question the capability of those making these monumential life altering unforseeable financial decisions...
Would I turn over my business and checkbook to my 12 year old grandson because his IQ is higher than mine, Hell no, We need Mayor's and Gov.'s that have had major financial problems yet have survived and progressed without handouts from Washington.
It appears this is being handled by people with motives to save face and not save the future for the people of the USA.
IMHO another stimulas would be like pissing in the wind.
We may assume that Mr Bernanke believes a further rate cut would not accomplish the same purpose that he has outlined for a 'stimulus'.
Sportsfan: Bernacke speaks in broad generalities and is very reluctant to provide specifics. That is his job. He is speaking from an ivory tower.
Barney Frank: We Should Have Done Things Differently
Yesterday, Congressman Barney Frank also spoke before the AFP conference, via video hook up.
The good news is that it is clear that Congressman Frank understands it was a mistake for government to drive the nation towards a housing market that resulted in more people buying homes than would otherwise occur, and that things should have been done differently..
The bad news is that he thinks the mistake was that not enough money was directed by government into the rental market!
The thought that the free market could handle both housing and rental market does not seem to have ever crossed his mind. The man is a regulationist. And, of course, he has no clue about the business cycle. He never even mentioned it.
Although, he took questions from the audience, questions weren't allowed by reporters, thus I was turned away when I reached the microphone.
This is the question I wanted to ask: Given that this weekend the Wall Street Journal reported that it is a dirty little secret that Paulson's Plan to buy up mortgages would not work and indeed would cause more problems for banks, and that is why Treasury shifted to infusing capital directly into banks, at what point was Congress notified of this situation, if at all? Further, given this huge error in the design of the $700 Billion Paulson Plan, do you think Secretary Paulson should resign?
I will be submitting these questions to Congressman Frank's office.
Malcome: I missed that. I do notice Malthus coming up in conversation more and more.