Construction Employment and the Obama Stimulus Package
Submitted by
CalculatedRisk on Mon, 11/24/2008 - 8:09pm (140 comments)
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Big Digs for everyone!
sportsfan how did you know?
Nemo, if we dig far enough, will we reach China?
Our future: begging the government for jobs laying asphalt or installing solar panels on tract homes.
Now we're bailing out Mexico too?
Pardon the phrase, but they're pissing into the wind...
While most people are aware that the economy went in to a tailspin from 1929 - 1933, with real (i.e., inflation-adjusted) gross national product (GNP) falling by just over a third, they might not be aware of the fact that two sub-components actually fared far worse.
Non-residential investment, which includes spending on buildings, machinery, and equipment used for commercial or industrial purposes, was hit the hardest. It fell by 75 percent over the four-year span.
The second worst performing GNP sub-component measures the consumption of durable goods, which includes cars, appliances, furniture and other items that typically last longer than a year. By 1933, this sub-component had shrunk by more than half.
Financial Armageddon: Two Spending Categories Are Especially Vulnerable
I was an early supporter of obama (largely based on his critical approach to adventurism), but reading this makes me want to make a mental note to short treasuries.
Do you think Bernanke has even read "Dogs and Demons"? It is so frustrating to be so much smarter than Hanky Panky and Ben yet be so powerless. But, then, so is 60% of the country.
Steve writes:
"Now we're bailing out Mexico too?"
What would be new about that? We have built them factories, bailed them out of bankruptcy, absorbed their excess labor, etc. Why not continue?
Big digs for everyone will mean even more rats fleeing out into the open
TARP covered up the rats...
If they are not careful they might end up "constructing" a mausoleum for the american economy.
"We have built them factories, bailed them out of bankruptcy, absorbed their excess labor, etc. "
we also sucked out millions of barrels from their part of the gulf, and have enjoyed a fair amount of labor which will never be part of our bloated entitlement state to the degree most useless, social-security sucking baby boomers will be in ten years.
We're finally gonna get the nice futuristic automatic highways, right! The ones in those Tom Cruise and Will Smith movies! Awesome, because driving is such a dangerous, liability driven PITA! (Okay, I know there are some who get pleasure out of driving, but not me... I don't know how people don't get sick of it after passing the age of 30).
More roads for exurbia - none of that mass transit idiocy for Americans. No way, no how.
IMO, i don't care about the infrastructure, all I want is geithner to fail in his confirmation hearing
Back in May I estimated the decrease in non-residential investment for malls, offices and lodging alone at about $60 billion in 2009. So I don't think $18.4 billion is anywhere near enough to offset the probable decline in 2009 non-residential investment.
Good thing there is plenty more where that $18B came from...
just adjusting my tag
Personally, I'm thrilled that Geithner will save us.
And build a monorail, too.
So, folks get laid off from financial services and get jobs in construction.
While I think this expansion is good I wonder what structural employment or unemployment issues may appear down the road.
Odd - jobs may be created in OH but someone from CA will have to move while the family stays in CA ècause the house is under water.
Odd - A good percentage of the economy is a service economy yet we create production jobs.
So what is going to be the ratio of paper pushers to tradesmen gonna be? I'm thinking about 3:1.
(Excellent) writes:
sportsfan how did you know?
It's hard to quantify.
But one thing I do know. We built this city on rock 'n' roll.
For $18.4B can they build me a modest house? It can also serve as an international tourist destination.
On your left you will see the "Endless Harem Pavilion", but please be quiet as the flag is at full mast which signifies that Ponyless is being entertained in the Pavilion.
On your right you can see the daily recreation of the crucifixion of Hank Paulson by angry bloggers.
"And build a monorail, too."
for the money we've spent abroad and on the tarp in the past 6 years, we could have an underground twin maglev rail parallel to the 5, the 10, the 80 and the 395. you could literally circumnavigate the lower 48 in 10 hours by train.
What about hot pirate chicks? How do they fit into this stimulation plan?
West Side Story-I Feel Pretty
YouTube - West Side Story-I Feel Pretty
One of my co-workers was going off about the "shadow rich people who control the world". Does anyone know who these people are? His theory is that anyone who is good for the poor will eventually get killed (see, MLK Jr; JFK; RFK)... and he's afraid Obama is gonna get killed.
So far I don't see Obama doing anything to really piss these folks off...
I'd just like to know who these ultra-uber-rich people are...
Odd - A good percentage of the economy is a service economy yet we create production jobs.
Barley | 11.25.08 - 12:16 am | #
The oddest thing about production jobs is that they generate a huge 'service job' multiplier.
A few highly automated & productive factory jobs produce huge amounts of stuff that has to be engineered, purchased, financed, insured, moved, warehoused, stocked & sold... then all those transactions have to be 'accounted for'.
Most 'production cost' is now overhead and a lot of it isn't even housed in the producing organization but rather 'outsourced'.
If there is anything we should have learned from the housing bubble is lay off a few hundred thousand 'day laborers' and you crash Wall Street - if the 'activities' those day laborers did goes away with them.
There is not much pay off in jobs on big infra xtructure jobs. Hope we get a new inter state highway exit close by so I can pan handle there.
It is going to be an interesting day tomorrow...
Expired
"Before U.S. markets open Tuesday, the Commerce Department is due to release its new reading on gross domestic product -- the value of goods and services produced within the U.S.
The report is expected to show that economic activity contracted at a 0.5 percent annual rate in the July-September quarter, according to the consensus estimate of Wall Street economists surveyed by Thomson Reuters. If that proves correct, it would be a tad worse than the government's initial estimate of a 0.3 percent rate of decline.
The third-quarter reading of the Standard & Poors/Case-Shiller index, a widely tracked measurement of home prices, is also due out before the Wall Street opens. The Case-Shiller 20-city housing index dropped a record 16.6 percent in August from a year ago, the largest drop since its inception in 2000.
Meanwhile, a preliminary report by The Conference Board on consumer sentiment in November, is expected to show more erosion in confidence from already battered levels, as consumers grapple with the continued fallout from the financial meltdown -- layoffs, plunging home prices and dwindling retirement funds.
Economists surveyed by Thomson Reuters expect the Consumer Confidence index to slip to 37.9 in November from September's reading of 38, which was the lowest since the New York-based research group started tracking the index in 1967. The projected level would be less than half of the 87.8 reading a year ago.
Wall Street closely monitors sentiment as consumer spending represents about two-thirds of all economic activity.
"The disruptions in the financial markets are really weighing on people's minds," said Mark Vitner, a senior economist at Wachovia Corp., who predicts that confidence will fall to 30 in November.
Also Tuesday, the Federal Deposit Insurance Corp., is scheduled to give an update on how many banks were on the agency's list of troubled institutions and detail how weak the banking industry's results were in the third quarter.
Meanwhile, Treasury Secretary Henry Paulson is scheduled to brief reporters on the government's financial bailout program Tuesday."
There is not much pay off in jobs on big infra xtructure jobs. Hope we get a new inter state highway exit close by so I can pan handle there.
Depends on the infrastructure - but you are right if all we get are more 'plain vanilla' roads. If there is IP & some complexity involved - then the multiplier is WAY higher.
I'd just like to know who these ultra-uber-rich people are...
YLSP | 11.25.08 - 12:22 am | #
They're the people to whom Bernanke and Paulson are handing the billions of taxpayer dollars.
It just works that way.
Let me get this straight. Obama gets elected, in part, on a "green" platform that is about as anti-carbon as one gets. Now, with the economy in shambles, Obama and his eco-warriers are champing at the bit to pave the nation with tar for new roads and highways?
NY Times
Obama and Bush Working to Calm Volatile Market
"...To calm anxious markets, the Federal Reserve and the Treasury plan to announce a major lending program on Tuesday to jump-start frozen loan markets, administration officials said. The Treasury had signaled earlier this month that it was considering such an action for consumer loans, but the action to be announced will broaden the program to include business debt.
In effect, the program would create a government bank to finance hundreds of billions of dollars in commercial debt, like car loans, student loans and business leases. The Treasury is expected to contribute $10 billion to $20 billion in seed capital, which would come from the $700 billion originally provided to shore up the financial system. The Federal Reserve would lend the new entity as much as 20 times that amount..."
hey guys. ummmm, you do realize we only really need about 70-80% of the people employed in 2005 in the future right?
Gloden question: how many Starbucks and Best Buys and Linens and Things do we really NEED going forward???
Yah know, tonight it really hit me that back in the ol' days when Greenspan was boss of The Fed, he used to rule money and wall street did listen to him (by in large).
Today, we have Ben and Hank and so we get 10 programs from each, every other day, versus one person with leadership. In the day of Greenspan, you never heard shit from Treasury, and by-in-large, they stayed out of the news doing what Treasury is supposed to do, i.e, manage tax payer revenues.
Hence, a great deal of the chaos and confusion today can be attributed to Ben being castrated and possibly neutered, while Hank has gone into usurping treason mode being too dominate (humping too many banker legs) -- both situations being not good for America and adding to chaos!
Long before "the bridge to nowhere" was in common American lexicon Japan had paved hundreds of miles of roads to nowhere. What do they have to show for it?
Do you know to tell if your wife / girfriend:
A. Likes you
B. Loves you
C. Is just showing off?
Does she:
A. Spit,
B. Swallow, or
C. Blow bubbles?
One could argue that it is far easier to pump up an economy that has already experienced a painful contraction rather than attempt to sustain the unsustainable.
It finally occurred to me tonight why I have such a problem with this stimulus package:
It is fundamentally another method for passing off borrowed money as current income...
It's our old friend Ponzi Finance!
In other words, the US government is now attempting to apply the exact same strategy that just leveled Wall Street as a means to save the US economy.
It would be one thing if the federal debt were only used occasionally and then paid off. But the almost endless deficits of the past decades and diminishing returns of new debt suggest otherwise:
These deficits are essential to our current "income", but they are not income borrowed from the future so much as bad debt masquerading as current wealth.
This fiscal stimulus is no different than the Wall Street leverage used to create the illusion of income and future wealth.
In the case of Wall Street these toxic mortgages, derivatives and inflated stocks and real estate constituted the wealth illusions.
In the case of these public spending programs the dollar is the wealth illusion.
These proposals of fiscal stimulus are no more than the application of "hedge fund finance" at the Federal level. This stimulus package is the ultimate "Super Sub-Prime Loan".
In ponzi finance there are only two alternatives:
a) Continuation of the misrepresentation of debt as current income.
OR
b) Collapse of the mirage of wealth.
Option b) is inevitable. Option a) is only a temporary postponement of option b).
So we choose to replace consumer and financial ponzi schemes with the public equivalent.
Because confronting the inevitable collapse is simply not an option. Even if postponing it only makes it worse.
But ponzi finance always collapses.
Long before "the bridge to nowhere" was in common American lexicon Japan had paved hundreds of miles of roads to nowhere. What do they have to show for it?
Comrade Bear (tj & the bear) | 11.25.08 - 12:30 am | #
Few people starved or went homeless. No revolutions...
I'm telling you guys. If we focus on the "smart highway of the future" we would have something awesome to export and make the rest of the world envious of!
But who unplugs?
Can't even get my housemate to turn off lights when he leaves rooms and music when he's not even in the house...
Meanwhile, I upgraded the firmware on the wireless router to reduce the power usage. But I'm an entropy nut.
ac, I'm tying to get a handle on this 'ponzi finance' that's involved in your objection to using debt in the stimulus program.
You say "ponzi finance is fundamentally the use of debt to create the illusion of real income out of borrowed money."
First of all, "ponzi" is clearly a perjorative term. A Ponzi Scheme, as I understand it, involves paying early investors a certain rate of return from the principal invested by later investors. The later investors are of course wiped out eventually.
In the case of the stimulus, the government is issuing debt in the form of T Bonds. Presumably, doing that diminishes the value of existing T Bonds by increasing the supply.
But the key difference is that T Bonds trade on an open market. Presumably the later investors do not pay as much (or receive a higher rate of interest on their Bond). The later investors are not wiped out. In fact the Bonds are fungible in the sense that each represents the same nominal value.
So fundamentally I don't see it as a Ponzi Scheme.
I also don't think the debt is creating the illusion of real income. I would, however, agree that the debt is creating the illusion of real wealth.
I could never characterize debt as income. I could, though, characterize debt as a form of wealth if someone were willing to hold that debt in exchange for a rate of return on it.
Setting aside the issue of greed on Wall Street or intent in general I also agree with your statement "The mechanics which dictate eventual collapse are what matter."
On that point I can only hope Obama and his people will be wise enough to give us a shot at avoiding collapse of the dollar. Time will tell.
sportsfan-
I'm not saying we need another Volcker. I'm just outlining my reasoning.
In fact, I don't think we'll have another "broad based" price increase as we experienced in the seventies. Certainly not in finished goods which will continue to deflate in quantity, if not in absolute price.
I do, however, think we'll have a general decline in purchasing power for primary goods such as soft commodities and utilities.
Particularly if taxes get raised on those who currently own the means of producing them.
Mexico has proven to be incapable of putting their people to work, incapable of developing their resources, incapable of maintaining civil order, incapable of honesty in even the simplest dealings, incapable of educating their people, incapable of managing their economy, and incapable of running fair elections.
Hey, you just described the Bush Administration.
"WHY it's stupid to refrain from environmental degradation of a specific local"
people, NO ONE is from wyoming. there is ZERO environmental impact of significance to mining operations there.
and no, i'm not engaging in an ad hominem attack. this is an AD PATRIAM attack. we, as a nation, are stupid.
we have NEVER made it a national priority to make coal a virtually free, zero-emission fuel. instead, we get a president talking about hydrogen and, four years later, music-man monorail projects involving solar panels.
I think you need three more zeroes here.
Volker the Viking | 11.25.08 - 1:47 am
LOL. Sorry. Wow, dat's a lotsa zeroes.
"So fundamentally I don't see it as a Ponzi Scheme."
don't worry, if treasuries are ever exposed to a real market where investors aren't just playing a mercantile game to prop up the american consumer, they'll trade at 15-par just like that mortgage paper does now, and you'll understand quite well.
200% Returns YTD. The carry trade is back. Details on how to get a piece of the action for yourself are on the public blog post below.
Stock Trading | Forex | Financial Markets: The Carry Trade Is Back (How to take your piece of the action)
OT for a sec:
Wife brought home some guacamole from the "rich folks" store up the road - you know, the kind of "guacamole" that actually contains avocados. Almost $8.00 for a small tub of guac.
Yup, but some say we got deflation.
I don't think so. In fact, I know we don't if food prices are inflating at something like 50% p/a. That same tub of crushed avocados was $3.00 two years ago.
Please continue with the deflation theories now, sorry I interrupted.
.
Ponzi scheme because the ones who come later are our children, grand-children and great-grandchildren and they will be wiped out... no?
CO2 sequestration of coal, according to Dr. James Hansen of NASA, is still not technically viable at a commercial viable level. To stop the CO2 content for the atmosphere from doubling this century, we have to sequester CO2 from coal or phase out its use.
cf. Charlie Rose show recently.
bgates,
You fundamentally misunderstand a portable store of energy versus an unportable store of energy
Coal cannot take the place of hydrogen or gasoline. Batteries are uncompetitive with both
sm_landlord
inflated prices in stuff we need (food), deflated prices in stuff we want (Ipods, phones, TVs, etc.)
I have a friend who manages an avocado distribution firm.
Guacamole isn't exactly rice and beans. But damn if I can't say it's not a necessity.
A Ponzi Scheme, as I understand it, involves paying early investors a certain rate of return from the principal invested by later investors. The later investors are of course wiped out eventually.
In the absence of printing money, the only way the USG can pay existing "investors" is with inflows from new "investors". As long as the USG can find new investors, everything's fine. If the USG runs out of new investors, then default.
So in a way, Ponzi.
vanadium battery technology
A promising solution. Could use some R&D money.
hong konger | 11.25.08 - 1:54 am |
Oh, I certainly agree we'll have a reduced standard of living in the U.S. in the future as a result of all the dollar denominated instruments being created.
BTW, I found your second statement (to exit/dryfly) much easier to understand than the original.
You raise a very interesting point about dollars being sequestered (a la carbon) by foreign countries, thus causing the U.S. not to experience the full impact of the dollars they have created and spread around the world. Compare that to my reply to "ac" where I spoke of debt creating the illusion of real wealth when someone else is willing to hold that debt as an asset in exchange for an agreed rate of return.
Good relations with the rest of the world would assist in not having all those sequestered dollars repatriated at once. On that score I have a lot of faith in Obama and his people.
"CO2 sequestration of coal, according to Dr. James Hansen of NASA, is still not technically viable at a commercial viable level."
it is only not viable because we haven't made it a national priority to make it such. driving a consistent 70mph from SF to Seattle to Chicago to Dallas etc also wasn't viable until Ike built the interstates. then it was.
Germany made 124,000 barrels a day of it at one point, and PRV has way more untapped juice than the Ruhr ever did.
"Coal cannot take the place of hydrogen or gasoline."
uh, it did for the germans for a few years, until the RAF bombed the hell out of the plants. my father's godfather was shot down doing exactly that 65 years ago.
but why do i bother. we're going to tap the PRV when no one wants our dollars in 20 years, and we'll never even get the chinese to install basic scrubbers on their plants. both of these things are inevitable, much like the dollar crumbling under the weight of the baby boomer retirement.
why i bother trying to prevent the inevitable with my insane ramblings, i know not.
t is only not viable because we haven't made it a national priority to make it such. driving a consistent 70mph from SF to Seattle to Chicago to Dallas etc also wasn't viable until Ike built the interstates. then it was.
Germany made 124,000 barrels a day of it at one point, and PRV has way more untapped juice than the Ruhr ever did.
bgates | 11.25.08 - 2:10 am | #
I agree with you.
anonymous,
Well the problem came recently were each $1 increase in national debt only produced $0.18 of new GDP. Given that government gets 18-20% of GDP in tax receipts, each $1 of debt brought in $0.036 in tax revenue.
That means the cycle breaks and national debt grows at an exponential rate when the government's average interest rate is above 3.6%
Shifting to saving from borrowing will raise the average return on new debt, and lower interest rates -- even though in the short term it will badly hurt GDP, which in turn will devalue the USD, which in turn encourages exports to rebalance the current account
The scary question is if the system is strong enough to stand up against the monumental momentum swings
Ponzi scheme because the ones who come later are our children, grand-children and great-grandchildren and they will be wiped out... no?
YLSP | 11.25.08 - 2:05 am |
They won't be wiped out in the sense that there will be some functional economy during their lives, though they will likely face a greater tax burden than current workers because "tax increase" has been branded "unAmerican" for some strange reason.
Look, I don't like to defend deficit spending, but the context is whether a stimulus is needed now to prevent a very deep recession or depression.
I would point to the current Administration, as I already did, for an example of totally wasteful deficit spending over 8 years, followed by the current looting of the Treasury on their way out of town as one big fat target for anyone inclined to shoot at deficit spending.
Monorail, monorail, monorail!
It did wonders for Shelbyville.
"They won't be wiped out in the sense that there will be some functional economy during their lives"
i wish the market didn't disagree so vehemently with that one lately.
did argentina have a 'functional economy' in the long decline starting in 1955 or so?
bgates
bgates,
Just a brief comment since you seem to be interested in coal.
When I watched this program, I came away convinced that the quality of our remaining coal is not that good:
Crash Course Chapter 18: Environmental Data - coal | Crash Course Videos at Chris Martenson - coal, ecosystem, nuclear power, ore extraction, peak energy, petroleum, planet earth, population growth, resource management
why i bother trying to prevent the inevitable with my insane ramblings, i know not.
bgates | 11.25.08 - 2:13 am
Then you should consider being quiet.
Hi Exit,
"Guacamole isn't exactly rice and beans. But damn if I can't say it's not a necessity."
IMHO good guac is essential to life. If I don't get some at least once every few weeks, I get really cranky. Which is why the wife paid whatever the price on her last shopping trip.
We're buying a freezer this week, so we can stock up on food like this at Costco at a lower premium. Of course I won't be eating the really good guac, but at least it will be made from avocados instead of partially hydrogenated vegetable oil and green food coloring.
I really hate to think about what the typical McDonalds hamburger will be made from next year when beef prices skyrocket. The one McDonalds hamburger I consumed this year made me sick for two days, and next year will be worse, as the ranchers are selling out this year due to high corn prices.
I'm trying to connect with a restaurant beef supplier to get some quality meat to freeze before next year. Hopefully restaurant demand is down far enough that I can score some of the good stuff at reasonable prices while it still exists.
bgates,
Fischer-Tropsch is not economical. Germans did it because they didn't have an alternative.
South Africa (well Sasol) does it today as a legacy of apartheid when they were under sanctions. It was continued mostly as a make work project
It wastes energy, emits pollution in production, even if you don't care about the mountain removal mining
To keep the costs down, they produce a lower octane, you also would need to look into how it meets the needs of regional/seasonal blends (eg low temperature) It also does not replace all the components extracted from oil.
It was economical for the first time in history in the last year when oil was high and coal low. However, as you said upthread -- why waste money on something that is uneconomical let alone detrimental
If you want to lower emissions, put a tax on those emissions
If you want to lower dependence on foreign energy, put a tax on imported energy
It's a simple way of finding efficient solutions. In many cases conservation is the cheapest solution and the only way to provide that incentive is pricing
"why waste money on something that is uneconomical let alone detrimental"
because we'll be just as isolated as those two countries when we swing back to the right ten years from now. i'm just saying that we might as well get familiar with the process since it will inevitably be our dominant energy source. and yes, the PVR stuff is very low octane. so is the thick orinoco sludge down in hugolandia. but we'll squeeze every bit of juice out of both in time.
EHP, you are being too mechanistic (and possibly sensible).
Just remember that there are usually unintended consequences to seemingly simple solutions. Let me restate that: there are always unintended consequences to seemingly simple solutions. Some good, some bad, some ugly.
bgates:we'll never even get the chinese to install basic scrubbers on their plants.
Incorrect, new Chinese plants are on average better equipped than those in America. The problem is Chinese plants switch to local southern coal when prices go up, and they don't use the emissions control equipment because it lowers profit margin -- they just need it in case of inspections
Few months back an article from MIT was published.
bgates,
The octane is the result of the Fischer-Tropsch process -- I wasn't talking about lignite/anthracite
sm_landlord,
Simple solutions, with as few loopholes as possible. You get what you want, you just have to know how to ask for it
crap - haloscan wiped out my entire comment.
Basically, bgates - I don't absolutely disagree with your stance that exploiting native energy sources is a plausible and reasonable course of action. I view it as both an economic and national security issue.
I just ask that you provide data sources for those less well versed in the discussion (like me). Being persuaded to use coal, a known carcinogen, with such lovely negative PR as WV and olde England, will require some convincing.
(Excellent) writes:
sportsfan writes:
It's hard to quantify.
Here, let me help.
The pig squealed exactly 10 minutes after your prediction.
(Excellent) | Homepage | 11.25.08 - 12:44 am |
Turns out somebody's time clock needs adjustment. My two comments on the last thread were exactly 5 minutes apart, not 10 (11:59 and 12:04)
CR's new post was, however, timed at 12:09, 10 minutes after my first comment and 5 minutes after my second comment.
My second comment, addressing CR's new post, thus occurred 5 minutes before it happened.
Now I know I need some sleep.
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Thanks for the memories, these go in the trash
So when does OH let the plebes know he will have to gut SS and Medicare to pay for all this glorious stimuli?
Whoever wrote that WSJ article is a moron. Construction is not poised for any type of rebound.
Availability of money is not what gets stuff built. Assurance of a market is what gets commercial stuff built, and when things are already overbuilt, there is no such assurance, government programs or not.
Any uptick is legitimate government infrastructure construction will take years to develop.
Any uptick is legitimate government infrastructure construction will take years to develop.
I'm inclined to disagree, particularly if you look at the state level. The prevailing anti-tax dogma has eviscerated state budgets for the better part of a decade. The only thing that kept the shortalls somewhat in check was property tax revenue thanks to the housing bubble.
The result is a serious backlog in state-level capital expenditures. If other states are anything like where I live, the Dept. of Transportation, the Metro Transit Authority, County Hospital, and the local school board, et al. have a list of projects they have been putting off for years. There are easily tens of billions of dollars of worthy projects out there that could be under construction 6 to 9 months after a budget authorization.
Since government, federal, state and local - especially federal - is bloated beyond belief, why not legislate that government lay off 10% of its workforce as other businesses are having to do, and contribute the savings to small business in the form of capital investments, loans, research grants and the like. Since small business creates more jobs than any other segment of the economy, this plan would stimulate the economy quickly while reducing the parasite of government.
"smart highway of the future"
Is that a laid of hedge fund quant hiking the Appalachian Trail?
Not to mention ran them out of the Southwest. Remember the what now?
So are these new roads going to be toll roads to make up for the states lost tax revenues?
Again, IMO there's nothing wrong with spending on wise investments, public or private.
The problem is convincing others to trade their property for false promises.
"...Under the new financing program that Treasury Secretary Henry M. Paulson Jr. plans to announce on Tuesday, the Federal Reserve would create a new special-purpose entity that would buy a wide range of consumer and business debt. The Treasury would contribute the equity part of the fund, which would absorb most of the losses that might occur. The Fed would then pump in as much as 95 percent of the money that would be used to purchase assets.
The new fund would, in effect, close the circle in the chaotic evolution of the Treasury rescue effort, officially known as the Troubled Asset Relief Program, or TARP. Under the new version, the government would once again plan to buy assets, including some troubled ones. The Fed would provide most of the money and buy comparatively healthy debt, like bundles of car loans, that private investors have stopped buying in recent weeks..."
dryfly,
I'd argue that outcome was dictated by other factors, especially culture.
Senorito On-Topico asks:
"Gloden question: how many Starbucks and Best Buys and Linens and Things do we really NEED going forward???"
The correct question is: "how many can we afford, and what kind?", although it's not that different, I guess.
Starbucks will become just like Jack in the Box, and start serving donuts. Oh, wait.
Best Buy will become Radio Shack, Linens and Things will become a department in Target.
People still need to buy coffee, music, computer cables, and bed sheets. Just without the BS.
ac,
I wouldn't argue that there are worthy projects; I would argue that the government is demonstrably the least capable of choosing and managing them.
Few people starved or went homeless. No revolutions...
On big reason is that unemployment is so shameful in Japan that it leads to suicide.
I'd argue that outcome was dictated by other factors, especially culture.
Comrade Bear (tj & the bear) | 11.25.08 - 12:38 am | #
I wouldn't considering their recent and violent past.
Ever hear of the Shoguns?
Ever see old videos of the labor riots they had in the 50s?
A hungry mob is an angry mob. They know that real well - there are some things way more important than 'efficient markets'.
dryfly, profits?
sportsfan writes:
It's hard to quantify.
Here, let me help.
The pig squealed exactly 10 minutes after your prediction.
"On big reason is that unemployment is so shameful in Japan that it leads to suicide."
--Basel Too
Kevorkian for Health Czar?
On big reason is that unemployment is so shameful in Japan that it leads to suicide.
Basel Too | 11.25.08 - 12:41 am | #
They didn't have that much suicide - some for sure but no massive epidemic of seppuku. They AVOIDED a lot of that because they kept people working [even if they had no real job].
Again there are some things more important than 'efficient markets'.
BTW - we are ripe to learn this lesson ourselves - the hard way.
G'night all - got work tomorrow.
ac,
No one with any fiscal sense would opt for the kind of stimulus package the Obama people are talking about.
As a matter of fact, Bush should not have forcast a $482B deficit for 2008-09, much less added hundreds of unbudgeted billions in the first quarter of the fiscal year, but he did and he did.
The U.S. is now clearly in a recession that seems to be deepening daily. That is the problem and the stimulus package is the proposed at-least-partial solution.
The history books can go into all sorts of detail about how the Bush Administration added $6,000,000,000 to the national debt, guaranteed that much more in debt known to fail after he leaves office, and accomplished nothing but a subversion of the Constitution, various war crimes and a general trashing of the United States in the eyes of the world, but that won't solve any problem, will it?
It is not true that the stimulus is applying on a national scale what just caused the downfall of Wall Street. There is no private greed involved in trying to avoid a Greater Depression, which is surely where this country will be shortly if nothing at all is done.
I do not believe there will be any illusion of wealth in the deficit spending that is being proposed. In fact I suspect many will awaken to realize that the wealth they saw over the last several years was in fact the illusion. Reality will bite.
I'm really bothered by Paulson's body language today as he stood next to Bush on the treasury steps. Watch with the volume muted.
YouTube - Bush Bums A Cup of Coffee - He's Broke Too, Paulson Gets The Bill
The problem is convincing others to trade their property for false promises.
ac | 11.25.08 - 12:38 am | #
I certainly agree that it will be difficult in the future to get folks to buy T bonds.
dryfly,
I don't agree, but I won't argue the point. Good night!
Ponyless in NJ(Good) writes:
dryfly, profits?
Ponyless in NJ | 11.25.08 - 12:43 am | #
Yes - what about them?
[Hint - 'profits' and 'losses' are mostly human constructs. If I don't call in the loan of my debtor - is he really in 'default'? If then nobody calls in my debts am I in default? If everyone does it and works like hell EXPORTING is the nation in default? Do profits & loses even matter if no one in society seems to 'account' for them? I've said all along going back decades that Japanese companies are asskick - but their 'stocks' suck for exactly this reason.]
YLSP writes:
I'm telling you guys. If we focus on the "smart highway of the future" we would have something awesome to export and make the rest of the world envious of!
I think they're called railways.
sportsfan,
You need to think macro. They have to spend the money (unless they wholesale rewrite private debt, which would take forever to sort out in the courts), and the available choices are how to spend it (suggestion: don't displace existing private spending)
So they have to spend, and infrastructure is convenient because:
- it has some benefit
- does not cannibalize private spending
- targets a sector with oversupplied labour
sportsfan,
The sooner that happens the better; it'll force us to live within our means.
Here's some more information on the "Ready to Go" projects.
AASHTO News
The next administration's attempt to prevent another Depression will all but certainly cause it.
The reason Volcker crushed inflation was because it was destroying our trade balance, not because of any internal problems.
Remember what he always harps on, the "strength" of the dollar. It's not the same as the price, but it is related to demand.
Depreciation of the currency hurts our foreign trade partners more than it does us. This is the underlying problem we face going forward.
IOWs, we've got to figure out a way to reduce the supply of money, not keep force feeding it down the collective throat of the world.
Note: we should have been doing this the past ten years. We should have been experiencing a growing rate of "inflation". Not patting ourselves on the back for a "great moderation".
(Apologies for length.)
"Barley writes:
So, folks get laid off from financial services and get jobs in construction."
Obama probably heard "structured investment vehicle" and just naturally assumed that the Wall Street guys can build houses and cars.
No wonder I managed several consecutive posts in the last thread, with everyone here.
[in re Mexico]"we also sucked out millions of barrels from their part of the gulf, and have enjoyed a fair amount of labor which will never be part of our bloated entitlement state to the degree most useless, social-security sucking baby boomers will be in ten years."
--bgates
Mexico has proven to be incapable of putting their people to work, incapable of developing their resources, incapable of maintaining civil order, incapable of honesty in even the simplest dealings, incapable of educating their people, incapable of managing their economy, and incapable of running fair elections. Mexico has a pretty high GINI coefficient as well, in case you haven't checked.
bgates, you sound like a 30 year old DailyKosDroid who lives in a fantasy world of the 1960s as you imagine it was. Intergenerational warfare is not becoming and makes you sound bitter. Have you ever even been to Mexico? Or anywhere more than 100 miles from home, for that matter?
IOWs, we've got to figure out a way to reduce the supply of money, not keep force feeding it down the collective throat of the world.
Note: we should have been doing this the past ten years. We should have been experiencing a growing rate of "inflation". Not patting ourselves on the back for a "great moderation".
(Apologies for length.)
hong konger | 11.25.08 - 12:54 am | #
I'm sorry for being obtuse, but I was under the impression that decreasing the supply of money constitutes deflation. If so, then your comment is internally contradictory - we cannot both decrease money supply AND been experiencing inflation.
What am I mis-reading?
er, wrong tense.... cannot both decrease money supply AND experience deflation.
Comrade Bear, I'm thinking it happens in 2009. The curtain will not just be pulled back, but ripped off.
EvilHenry, I think I am thinking macro. The government is the only entity that can spend the necessary sums.
I do agree with dryfly and not Comrade Bear on that subject. The government project may not be the best designed or executed or the most efficient or less costly, but those aren't the goals of doing the job.
ac,
I wouldn't argue that there are worthy projects; I would argue that the government is demonstrably the least capable of choosing and managing them.
I don't disagree, except that some projects have to be carried out at the level of the national government, disagreeable as that might be.
What private company can be expected to develop an interstate highway system?
Sure, private industry can play a large role in the construction of such a project, but from a high level management perspective how can the be expected to maximize the public benefits of such a project at the expense of the industry's benefits?
They cannot.
Let private industry do everything where their profit motives are aligned with the public good. Which is a shockingly large number of things when they also must contend with the financial consequences of public wrath if they are seen as social parasites.
Let the government do the other stuff where private industry simply can justify their involvement in terms of ROI.
More precisely:
Choose government vs. private involvement based on which leads to the most efficient use of resources in promoting the public good.
Again, paradoxically public good is often best advanced by private interests.
What am I mis-reading?
Exit | Homepage | 11.25.08 - 12:58 am | #
Thank you.
Add to that the bit about how the world was sucking dollars out of dollar zone like a vacuum cleaner [remember the conundrum]... there wasn't a lot of 'forced feeding' involved.
Robert Gates Reviews military's role in homeland defense.
Um, yeah. CSC, come out, come out, whereever your are! I remember you first posting about standing regiments being stationed stateside.
This whole thing reminds me of a chess game that was lost 5 moves ago.
The best you can hope for is to hang on long enough for a mistake to be made so you can win a draw
I'm not kidding. Wireless sensor'd highway with sensors in the cars that provide guidance. You punch in your destination and it takes you there; as well as organizes the traffic so everyone gets there faster.
Heck; you can use the TV bandwidth going dark in February. Set up some type of mini-GPS-like wireless connection that is a bit more accurate. GPS is a 20 year old technology, no? Actually it's 40+ year old application with civilian use for 20+ years.
Anyway. I'd prefer we invest in building better infrastructure rather than paving over and re-building the 40 year old infrastructure. But I guess I don't have a say since I'm not President or a fucking Keneysian economist...
Oh geez, I need to preview before I post. At least Dryfly got what I was asking.
Except, I'm not familiar with your reference,
Add to that the bit about how the world was sucking dollars out of dollar zone like a vacuum cleaner [remember the conundrum]... there wasn't a lot of 'forced feeding' involved.
Unless you refer to the fact that the planet gladly took our currency as the basis of trade.
YLSP -
Maybe we've read some of the same sci-fi with that technology. Of course, with such guidance comes ease of tracking. I imagine you'd encounter some civil libertarian opposition on those grounds alone.
This whole thing reminds me of a chess game that was lost 5 moves ago.
The best you can hope for is to hang on long enough for a mistake to be made so you can win a draw
EvilHenryPaulson | 11.25.08 - 1:07 am | #
Broward might like that analogy.
Me, I feel more like the guy they strap to the spinning wheel while the blindfolded knife thrower attempts to miss me. And Paulson is doing shots as he pulls out his bazooka knife.
Gives whole new meaning to 'knife catcher'.
Exit, I got it also (although when you revised the verb tense you switched from 'inflation' to 'deflation' which was actually more confusing).
The part of hong konger's comment that I didn't understand was:
The next administration's attempt to prevent another Depression will all but certainly cause it.
The stimulus may or may not avoid a depression, but I don't see it creating one.
We don't need a Volcker to crush inflation these days, although we might again need such a person if the prime rate hits 18% or so.
The libertarians would travel the roads not well traveled anyway.
I know why we won't get the "smart highway" or even come close to a deployable solar power system. Because that will put people out of work; and people are very resistant to change. From top to bottom people hate change. They don't want to do anything different until they are forced to. This is such an innate part of being human, that it's probably the reflexion that is putting us on this path. We can keep doing bailouts until something physically stops us... then we'll be in for some massive change.
YLSP,
Some of the best of America is totally new development. We need to do better than more of the same.
YLSP, Why won't we "even come close to a deployable solar power system."
I bet the State of Nevada could do that with ease and supply power to every surrounding state.
Exit - try 4D chess with knives falling.
What's not to like?
This is the usual business of public policy. It just gets a little sharper during tough times.
C
Another Whack-a-mole. Is it 1953? New Federal roads for our new federal cars and motorhomes? A renewal of our textile industry making orange vests?
sportsfan - yeah, arrrrgggh. At least I get in some pirate talk that way.
YSLP - I don't disagree. However, I also think that change occurs incrementally and practically invisibly, even on an infrastructure basis. The revulsion of an existing societal structure tends to occur 'organically', and yet all this time "we've" been trying to 'systematically' change the system.
Betamax vs. VCR. Before that, Model T vs. horses. TV dinners vs. cooked meals. Behavior IMO is based only tangentially on conscious direction, and is more so based on convenience, and in this case, hopefully, on peer pressure.
Building roads isn't really the answer. Encouraging decentralized energy, and using less energy per capita, is the behavioral change necessary to navigate out of this mess. Otherwise, just more of the same - centrally planned and fukced up systems will emerge.
exit/dryfly:
My thesis is that the globalization "explosion" was made possible by Nixon's "opening" of China and Volcker effectively reducing the supply of money (by raising rates
extraordinarily) that was created to pay off the Vietnam War and LBJ's disastrous "War on Poverty" (in a monetary sense).
Volcker's policy had the effect of strengthening the purchasing power of our new found trading partners. A strong dollar (for them).
Anyway, as the world's reserve currency, we've been flooding the world with dollars (external easing, if you will), and foreign central banks have had to expand their monetary supply to accomodate that trade.
According to Bernanke, we've had a "great moderation". But, my contention is that it's because those dollars are sterilized in the sense that they've remained external to our "home economy".
exit- my assumption rests on the idea that we are experiencing deflation here not because the supply of money isn't large and dispersed enough. But because it isn't "here"; in it's "native" economy, so to speak.
Dollar/ monetary policy is somewhat bifurcated between "us" and "them".
We don't need "new" dollars. We need to trade for the existing ones overseas.
"I bet the State of Nevada could do that with ease and supply power to every surrounding state."
the stupidity of this nation is truly sad. we'll fantasize about solar power in nevada when wyoming has all the coal we need for a century. we're just too stupid to spend a few cents per BTU to sequester it, instead we'd rather indulge science fiction daydreams of nuclear, wind, thermal and solar power at ten times the cost.
It is not true that the stimulus is applying on a national scale what just caused the downfall of Wall Street. There is no private greed involved in trying to avoid a Greater Depression, which is surely where this country will be shortly if nothing at all is done.
I do not believe there will be any illusion of wealth in the deficit spending that is being proposed. In fact I suspect many will awaken to realize that the wealth they saw over the last several years was in fact the illusion. Reality will bite.
Your point has merit. I can buy the argument that the intent is genuine and not driven by greed.
But ponzi finance is fundamentally the use of debt to create the illusion of real income out of borrowed money.
So we are proposing to use deficit spending to create economic growth that can't realistically pay off the money we borrowed.
If claims illustrated by graphs like this are accurate. Then we are merely borrowing to preserve the illusion of the value of our currency and by implication our real income that is denominated in this currency.
Again, the use of borrowing to create the illusion of real income is ponzi finance.
Intent doesn't matter.
The mechanics which dictate eventual collapse are what matter.
Let me say it like this:
I don't think greed caused the downfall of Wall Street.
Individual greed can lead to collaboration of multiple parties that leads to collective benefits despite the selfish motivations of the contributors.
The social and economic destruction wrought by ponzi finance comes not from greed, but from dishonesty and shattered dreams.
Progress and elevation cannot be accomplished through deception and prevarication no matter how noble the intent.
No way, no how, no vacancy.
bgates-
try reading some Dickens. Coal blackened skies aren't some flight of Victorian fancy. Modern environmentalism found much of its nascent push from those who experienced it. Or, try traveling in China.
If you have some nice links to support your "few cents per BTU" claim, please provide.
Again, it's more of the same - attempting to supply energy at the meth-ed out pace the US consumer uses, rather than addressing how to reduce the energy usage per capita.
"...The social and economic destruction wrought by ponzi finance comes not from greed, but from dishonesty..."
the root is INTELLECTUAL dishonesty.
but how can you explain this to people in a nation where 45% of us are young-earth creationists? the sheer stupidity of the average american is truly formidable, and they've been brainwashed for 35 years to see dollars as money. getting away from this paradigm is like trying to make north korea or moldova into silicon valley.
bgates,
It costs far more than a few cents per BTU to gassify coal before burning in order to sequester it. I assume you meant KwH, but even then a large scale implementation would be easily half a dozen cents per KwH if you assume capital costs are amortized at a low rate
"Again, it's more of the same - attempting to supply energy at the meth-ed out pace the US consumer uses, rather than addressing how to reduce the energy usage per capita."
no worries, a depression is great for that.
misguided idealists gave us costly foreign adventures thanks to right wing knuckleheads, perhaps this quest for alternative energy will similarly give us trillions in stupid debt because of a particularly brainless wing of the left.
it is just sad that we're sitting on the powder river valley and are too stupid to properly exploit it.
bgates,
West Virginia does suffer from the coal industry, arguably more than it benefits
bgates,
well, killing television would be a good start to reducing the 'de-literacy' rate.
and to ac's point about deceit, yep.
How many of us ignore what we know to be right? The trickle charge from 300 million TV's, computers, etc. - I'm not going to find the proper link, but that's one helluva lot of energy getting wasted.
But who unplugs? Where is the institutional, governmental, and societal leadership that says, conserve?
" I assume you meant KwH, but even then a large scale implementation would be easily half a dozen cents per KwH if you assume capital costs are amortized at a low rate"
these capital costs are a tiny, tiny fraction of the equivalent for commisioning and construction cost of new nuc plants and/or whacko fantasies involving wind, thermal, solar, etc.
as for blackening the skies like manchester - gimme a break. and i'm not talking about the high-octane crap in messy Massey land, i'm talking about the stuff in THE LEAST POPULATED STATE IN THE UNION where no one knows or cars about anything remotely resembling environmental impact in terms of getting the juice into the truck.
"West Virginia does suffer from the coal industry, arguably more than it benefits"
west virginia suffers far more from inbreeding and christianity than coal. don blankenship is far better than those people deserve in any case. at least he creates jobs in the state besides "oxy dealer".
sportsfan writes: The history books can go into all sorts of detail about how the Bush Administration added $6,000,000,000 to the national debt, guaranteed that much more in debt known to fail after he leaves office,
I think you need three more zeroes here.
misguided idealists gave us costly foreign adventures thanks to right wing knuckleheads, perhaps this quest for alternative energy will similarly give us trillions in stupid debt because of a particularly brainless wing of the left.
it is just sad that we're sitting on the powder river valley and are too stupid to properly exploit it.
bgates | 11.25.08 - 1:41 am | #
Ah, it's always refreshing to be lumped in with the brainless. I see you decided to ignore my request for links to support your BTU claim. But nice attempt at an ad hominem attack. As for that particular wing of the left, I'm perfectly willing to countenance your well-reasoned and supported argument about WHY it's stupid to refrain from environmental degradation of a specific local, absent compelling complementary policy that encourages prudent energy use.
Everything requires power. Using power intelligently is my primary point. I don't think that either political persuasion can stake higher ground here.
bgates,
It's not just the capital cost, there is an additional operational cost both in terms of efficiency (energy input to gassify it) and increased maintenance. It's at the demonstration level right now
I'm not advocating any option over another across the board because there is no across the board winner for every market.
If you're concerned about lowering emissions, the best way is to put a tax on them