Rolling US Economy Into The Shitbin Thread

not to pick on you ned but there's some solid evidence that a cut in payroll taxes for lower income workers would help stimulate the economy. thats why i was mentioning it is a good idea upthread and presumably why the obama team is considering it. i also think its worth considering on a moral level as well not only did obama campaign on it the tax burden felt by the working poor is disproportionate imo but first and foremost i think the facts bear this out.

i mean eff jonah goldberg and he wants the right thing for the wrong reasons but the payroll tax thing is an example of why ideology is such a shackle. as retarded as that mankiw column is krugman's been on a similar tip lately advocating shit that the data just doesnt support

My point, not that there was much of one, was to counteract Don's crabbiness in the post beforehand -- which the cynical part of me actually happily agrees with, most of the time. There's larger issues over ironies of self-described conservatives like Goldberg whipping back and forth wildly between arguing for self-determination and forms of social control that have been beaten into the ground so I'll note those and move on.

Honestly I'm indifferent to the payroll tax and its suspension as being a good idea, I have no idea WHAT a good idea is. Part of this is my own slacking on the responsibility of being a well-informed citizen, but there's a larger opaqueness in the culture upon the economy that renders a lot of the discussion we've read, heard and argued over to be so much spinach. It's one reason why I've tended towards the dispassionate in recent weeks about it all -- when everyone is shrieking doom, disaster and the end of the economic world, it's amazing how quickly that becomes a comfortable baseline. If this tax idea turns out to be a good solution, great, but I'm not going to wave flags for it at this point, or much of anything else.

Yes Ned but you can't deny that we are rilllllllllllllly good at planning on getting drunk. MAYBE the planning on getting laid part was a stretch.

Depends on the quality of the drink.

FWIW, raising taxes in the middle of a recession (or worse) is not a good idea. i haven't turned into a reagan-worshipping supply-sider/laffer curve devotee here -- i'm 100% all in favor of raising taxes when the economy recovers (which, for all the doom and gloom on these threads, is something we need to keep in mind that WILL happen at some point however that may occur). but doing so at a time when demand is slumping will be yet another thing to further inhibit demand and take money out of the hands of consumers. i don't think that you have to be a card-carrying republican to see things that way.

i'm also open to temporarily trimming or suspending payroll taxes (mainly because those taxes fall most heavily on lower-income individuals) -- although i would also like to see the details of such a plan before signing off on it. and, i believe that Obama has already said that he won't immediately repeal the Bush tax cuts and will instead let them sunset as they are already scheduled to do. again, if the economy wasn't in the state that it's in i would never support either position but given where we are i think that both positions should be considered.

lol ritholtz is REALLY mad at Ken Lewis

http://www.ritholtz.com/blog/2009/01/time-to-fire-ken-lewis-of-bank-of-america/

Volcker speaks:

The report today was issued by the Group of 30, an organization of international economists and policy makers. But the recommendations were immediately seen by observers as a building block to an Obama plan because the lead author is Paul Volcker, the former chairman of the Federal Reserve during the Carter and Reagan administrations who will serve as a special Obama White House adviser. Part of Volcker's role is to help mastermind what could ultimately be the biggest overhaul of the U.S. financial system in decades.

Volcker said he would press the new administration to consider the measures, "but it's up to the administration to decide what they want to do."

The proposal offers 18 major recommendations that would insert government regulators into the board rooms of financial institutions as never before. The plan recommends vastly increased oversight of major banks, going as far as to recommend the end of an era of mega banks whose size makes their failure potentially catastrophic to the global financial system. To limit their size and scope, banks, the document states, should be prohibited from managing hedge funds or private equity funds.

In addition, major mutual funds should be required to operate as commercial banks, subjecting them to stricter government oversight. Those that choose not to comply should be forced to sell only relatively safe financial instruments offering investors low risk, and, most probably, limited room for outsized profits.

The document suggests that venture capital groups and rating agencies should also face a battery of government regulators.

"The issue posed by the present crisis is crystal clear: How can we restore strong, competitive, innovative financial markets to support global economic growth without once again risking a breakdown in market functioning so severe as to put the world economies at risk?" Volcker said in a statement. "We hope that our proposals, which explicitly relate to the weaknesses that have become evident in the financial system over the last year, will be a useful contribution to the debate about needed reforms both by private financial institutions and by public authorities."

Hey, go for it.

yeh, cosign

Senate Votes 52-42 to Release Second Half of Bailout Funds

Every cloud...

http://www.aip.org/fyi/2009/004.html

esp. this:

"Department of Energy: $1.9 billion for basic research into the physical sciences including high-energy physics, nuclear physics, and fusion energy sciences and improvements to DOE laboratories and scientific facilities. $400 million is for the Advanced Research Project Agency – Energy to support high-risk, high-payoff research into energy sources and energy efficiency.

oh hai, welcome back U.S.A.!

Can anybody explain to me why everyone keeps accounting obama's plan with $300B in tax cuts when I thought it was pretty clear from the campaign onwards that he's planning on revoking dubya's tax cuts and even raising the top tax rate so that cutting taxes on "95% of workers" will be covered by the other 5%?

Like, it's not a $300B hole if you fill it in with $300B+.

party time, bailout-style

http://dealbook.blogs.nytimes.com/2009/01/16/rescue-of-banks-hints-at-nationalization/

I think I've found the definitive example of challops:

http://www.latimes.com/news/opinion/commentary/la-oe-stein16-2009jan16,0,5790303.column

Williamsburg, Brooklyn: Paying $3,000 a month to live near Manhattan? Exactly as near as the Sweathogs lived? You can wear librarian glasses, play in a band and go to readings in Iowa City too. Either way, you're not in New York.

hahaha

joel stein needs to be eviscerated

he IS right about w'burg, though ... and $200+ jeans o_O

though i cringe @ the thought of "puritan chic"

ayo tracer hand re: discussion on nationalization:

(W)hen you nationalize the entire banking system, who, exactly, are these “new owners” who are buying the cleaned-up banks supposed to be? And what investor is going to be interested in putting up money to acquire a bank that has to compete with nationalized, and therefore subsidized, banks (since the government presumably won’t be able to privatize all at once).

whole things is worth reading

Unemployment rate in my state (Oregon) officially jumped one full percentage point, from 8% at the end of November to 9% at the end of December. State officials said they expect that figure to be corrected later and they think it may actually be higher.

Yo! Up 1% in one month! Maybe more. We are accelerating into nosebleed territory here. Viscera slamming into spinal columns and all that.

one of the guys who swore in with me today told me he took a pay cut for the govt job because both of his cousins and like three other well-to-do professionals he knows personally have been laid off. this is the DC area! that's not supposed to happen!

Lamp is his argument really that there's a "moral hazard" in the govt running insolvent banks - that the US govt will jump to declare banks insolvent just so it can get its filthy mitts on em? i can't believe this is true - the US govt is uninterested in running banks longterm, as far as i'm aware. any talk of nationalization is short-to-medium-term at most.

i think the reason we keep hearing about this is that americans are a little miffed at putting up billions and nobody even gets added to the board! we put up billions and are still somehow in this position of begging the banks to lend.

i.e.

http://www.ritholtz.com/blog/2009/01/nationalize-now/

some have proposed this idea as well (if only temporarily).

friend of mine her husband works at phillips and hasn't done diddily squat the last week or two as there are no new orders coming in. :-(

friend of mine has been fired (and if she doesn't get a job soon, will lose her house).

:-( shitty times. but for how long? "expert" was quite certain it'd only last a year or two. bell curve ahead? hope so.

I think the "expert" is flat-out guessing about how long this recession will last. It may technically end in "a year or two", but I think it will start as a painfully weak recovery that barely qualifies as the "end" of the recession, and only because the economy isn't actually shrinking. It will probably stay shrunken for a while.

One valid indicator to watch is when housing prices stop falling and maybe even blip up a small amount. Until this happens, we aren't at the bottom, yet. The economy may bump along the bottom for quite a while before it genuinely turns up and grows again. When unemployment falls for three or four months running, things will be looking up again.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a.sLr8sp1UBM&refer=home

Prices of houses aren't going down at all here, in fact they still remain the same. Crazy.

not going down in hackney much either

“I’m hoping 300 stores is enough, and that they’ve done what they need to do,” said Patty Edwards, a retail analyst with Storehouse Partners in Seattle. “Slow drip, even in coffee, isn’t necessarily the best thing. Sometimes you just need to get the pain over with.”

I say that instead of this let's start cutting away at the dead wood that are "retail analysts".

www.economist.com/displaystory.cfm?story_id=12972083

Excellent article, placing the global savings glut at the heart of the story. Interestingly, it argues that better regulation or macroeconomic policies would actually have had little effect, and that these imbalances will remain unless specifically tackled.

not going down in hackney much either

Zoopla says down 18%. Having said that Zoopla says houses round our way (in the unfashionable East Midlands) are down 16% and a house down out street just sold for what sounded to me like silly money. I think there's still a lot of variation from street to street, house to house. Friend of mine in the business says they've had more interest this month than for a while, general feeling that even if houses go down another (10/15/20/who knows%) there are bargains to be had now. Not scientific or anything obviously.

HOUSE PRICES DOWN TO LEVELS NOT SEEN SINCE 2005

I'll buy in @ 1997 levels.

Spend first, ask questions later.

“The first rule of technology investment is you spend time understanding the end user, what they need and the conditions under which they will use the technology,” said Craig Settles, an industry analyst and consultant who has studied broadband applications in rural and urban areas. “If you don’t do this well, you end up throwing millions or, in this case, potentially billions down a rat hole. You will spend money for things that people don’t need or can’t use.”

Dozens of programs included in the stimulus measure could entail a similarly complicated cost-benefit analysis. But with Congress and the White House intent on adopting the economic recovery package by the end of next week, taxpayers are unlikely to find out whether these programs are great investments or a total waste — or something in between — until long after the money is out the door.

The proposals for expanding broadband service offer a particularly useful case study because the potential benefits of wider network access are indisputable. And yet, supporters cannot simply wave away the potential pitfalls, including the fact that it will take at least until 2015 to spend all the money on infrastructure to deliver the service — vastly limiting the stimulating punch."

not that legislators shouldn't be cautious about all this, but it's fun to replace "stimulus" and its synonyms with "iraq" and pretend like it's 2002-03 and that they'd been as circumspect then.
interesting discussion here on cyclists versus structuralists here ~
http://www.washingtonpost.com/wp-dyn/content/article/2009/01/30/AR2009013003116.html

we're fucked

http://www.nakedcapitalism.com/2009/02/bad-bank-assets-proposal-worse-than-you.html

i actually agree with you re this geithner proposal, dan. it's a total muddle -- it doesn't satisfy anyone (not the folks who just want the troubled banks to eat their losses already and let the chips fall where they will, and not the folks who just want to nationalize the troubled banks and be done with it already) and it may very well prolong this whole fucking mess if these "guaranteed assets" go tits up AND gum up the federal fisc with even more shitty worthless assets. even the "sweetener" of limiting executive compensation appears to be lacking in substance (e.g., what about stock options? funds stashed in retirement plans?) it actually makes the "bad bank" idea look GOOD.

i don't want to get all morbs here, and my opinion may change if/when more details become available. but if this is "bipartisanship," it's for the birds.

not to mention that debt backstopping -- which is what was done to bail out Citigroup and Bank of America, and which appears to be what the debt guarantees are -- haven't WORKED. investors are even LESS willing to buy their securities after they got the fed money.

despite the reference in that post to the IMF study, the empirical data for what we want to do is scant. We are getting ready to throw MASSIVE amounts of money at a problem that a) we barely understand, b) we have no historical models to adequately base our actions and c) is probably bigger/more complex than we all imagine. The poster is a little hard on the Obama administration (given the rock/hard place situation) but acting on impulse with almost no due diligence for the banking situation and overall stimulus package continues to frighten me. As usual, we're going to get what we pay for but in this case, the whole world will probably suffer.

like pigs at the trough. Or in this case, the teet.

http://online.wsj.com/article/SB123369271403544637.html?mod=todays_us_page_one

U.S. Rep. Marcy Kaptur (D., Toledo) is advocating homeowners threatened with foreclosure exercise squatter's rights in trying to stave off the loss of their house.

"I'm saying to them possession is 99 percent of the law; you stay in your house," Miss Kaptur said yesterday, continuing a crusade she started several weeks ago in Congress and CNN picked up Thursday night.

She said she believes that many so-called predatory and subprime loans -- those made to borrowers who did not qualify for a conventional mortgage -- may have been illegal.

She urged homeowners not to panic and leave their home just because they receive a foreclosure notice from their lender, and she said they should demand that the mortgage-holder produce a mortgage audit.

"I say to the American people, you be squatters in your own homes. Don't you leave," she said during a speech in Congress earlier this month.

i don't want to get all morbs here...but if this is "bipartisanship," it's for the birds.

But I just added a wing to the treehouse!

Don, the private economy just got through misinvesting multiple trillions of dollars in soggy tissue paper. They stuffed so much good money into rat holes that for the foreseeable future the entire globe is going to be starving for the cash to pay for important, necessary obligations and debts - the ones that put food on your table, clothes on your back and electricity in your house.

I agree it would be nice to get good value for the dollar as we post huge new national debts, but the worse alternative would be to let the real economy starve and bring a few hundred million more people to beggary in the process.

It can't be repeated too often - the private economy, the titans of business, the wizards of finance, the MBAs and people in power suits, the CEOs and CFOs fucked us blue. They screwed up to the tune of almost killing the whole economy.

Who you going to turn to now? The gov, bad as it may be, is at least partly accountable to you. You seen any titans of industry in breadlines lately? Can you vote them out of office?

turn to harry markopolous, for starters. the hearings on the sec's madoff-related shenanigans is full of relevant insights about how we got to this point. for dealing with the privileged boy's club for so long, dude should get a medal and a high-ranking financial oversight post

"welcome to 2009"
http://www.sprott.com/pdf/marketsataglance/MAAG.pdf

Just fingering the yahoos and yelping at them is something a lot of people can do. If Harry Markopoulos can pump a trillion dollars into the economy in the next 10 months, or give people an alternative way to honor their contracts and debts that does not involve using money, then I would turn to him to get us out of this mess.

I got an email from a good friend at a hedge fund last week. He's a *very* moderate guy, and he had this to say:

"The one thing that I disagree on is that for all the talk of making Tarp II diff from Tarp I, I don't really see it happening. An aggregator bank still just takes bad assets from a bank in exchange for capital. If you pay market, the banks will be insolvent, so they won't participate. If you pay above market, you're basically just injecting capital in to the banks, which is what they did in Tarp I. Why are they scared of nationalizing? Citi is an insolvent bank - wipe the equity, take the company, remove the bad assets, put the remaining good company back in to the public markets, repeat for the next insolvent bank. If they try to let a Citi (or maybe evan a BofA) earn their way out of this we will end up with huge parts of the banking system in zombie mode, a la Japan. That would be very bad and will only prolong the pain."

http://www.thenation.com/blogs/jstreet/405216/will_geithner_and_summers_destroy_the_us_economy?

http://www.thenation.com/images/people/christopher_hayes.jpg