Tom Maguire (unlike the media) is on the case. I particularly like this comment:
I’m beginning to think the general journalistic reaction to this whole thing is “But I went to Journalism school because they said there was no maaaaath!”
Or logic.
Category Archives: Business
Will Humans Take Early Retirement?
I agree, it seems likely. The question, as JoSH notes, is how to give everyone sufficient capital.
Making Orwell Proud
Some examples from VDH:
Guantanamo is still open, but there are no longer “enemy combatants” there (Perhaps the name of the camp can be changed next?). The old campaign snicker that a naïve McCain really believed that a then-stronger economy is “fundamentally sound” is now the new Obama gospel about a far weaker one. There are to be no more earmarks in spite of 8,000-plus new ones. A $3.6 trillion-dollar budget is proof of commitment to financial responsibility; the remedy of Bush’s borrowing profligacy is to increase the deficit from $500 billion to $1.7 trillion. Bush’s signing statements bad; Obama’s signing statements good. An end to lobbyists in an administration ensure there are over ten; the highest ethical standards mean the nominations of Daschle, Richardson, etc. The changing meaning of words really does trump memory and reality itself.
Not to mention what a disaster that it would be to make health insurance benefits taxable, which was one of the many mendacious ways by which they slithered into the White House, except that now, maybe it’s not such a bad idea:
Now that Mr. Obama has begun the health debate, several advisers say that while he will not propose changing the tax-free status of employee health benefits, neither will he oppose it if Congress does so.
Let me translate: “Yes, I don’t want to take responsibility for it, because even my lapdogs in the media might find that too much hypocrisy to stomach after all my demagoguery on the issue last fall, but I’ll sign the bill when it gets to my desk, so go for it.”
Well, actually, I’m not sure that it would make Orwell proud. More likely sad at his own prescience.
The Country Is In The Very Best Of Hands
Congressman on the space committee, meet the real space program:
At one point he raised a few eyebrows when he said America’s position in space depended “particularly on funding from the US Congress. Only governments can really afford space.” That was a rather odd comment given the number of people in the room who do business in, and make money from, space, without relying on the Congress for funding. Asked about that comment in the Q&A session that followed his speech, he amended his comments somewhat. “Fundamental research has to come out of the government and then our private sector will partner with us as a government to improve it and make it more ubiquitous, so to speak.”
Later in the Q&A came the topic that is almost inevitable in any discussion of commercial space policy in the US these days: export control, or ITAR. “Can you comment about your thought on ITAR and the ability for US companies to sell products overseas?” someone asked. Griffith had a blank look on his face. The questioner, and others in the audience, repeated and elaborated on the question: you know, ITAR, export control restrictions, that sort of thing? “Is that a ‘Buy America’?” he asked. “I’m not quite sure.”
Sigh…
Well, at least, given that he’s completely innocent of the issue, he might be amenable to being persuaded into a sensible position on it. I’d rather have someone who is educable than someone who is damned sure of the wrong answer.
What Did We Get For Spendulus?
…that prediction and the job calculations cooked by the president and his economic advisers have already been proven wrong. A Republican insider on Capitol Hill explains that the “forecast for saving or creating jobs is based on the stimulus ensuring that the unemployment rate not exceed 8% between now and 2014.” But we are already passed the 8% mark.
What would have happened without the stimulus? According to the administration’s calculations, we would then hit 9% unemployment. But that is the very figure that many economists now predict we will hit in a matter of months. Some predict we will hit 10%. Four states have already hit that figure.
This is the biggest financial fraud in history. It makes Madoff look like a humanitarian.
Mark To Market Thoughts
In discussion from this post from a couple days ago, a commenter makes what seems to me a plausible point:
I firmly believe that the destructive effects of FASB’s change to a mark-to-market accounting standard in November 2007 cannot be overstated. It never made any sense, and the proof of this is that neither Paulsen nor Geithner have been able to do what they set out to do, which was to buy up the so-called “toxic assets.” The problem? They can’t determine a fair price for assets which have been devalued on paper to effectively nothing because of the new mandated accounting standards.
Yet Geithner said recently that these assets have “inherent value” that is not reflected by their current market price, which is an implicit repudiation of the mark-to-market standard. It’s also the reality he has to face. Hence the problem, a kind of Catch-22 of his own making. (He and others, to be fair.)
To buy up the toxic assets at higher than mark-to-market value would admit what everyone knows but won’t speak: that these assets are worth a lot more than the mark-to-market value and always were. If the government hadn’t forced the financial companies to grossly understate the value of their assets in the first place, this banking crisis might never have occurred or at least not nearly at this degree of severity.
Furthermore, if Geithner believes the assets are worth more than the mark-to-market value, then why not simply change the FASB rules back to what they were pre Nov2007 and let the financial companies mark them up on their own balance sheets instead of selling them back to the government? Same reason. Because if the government were to now admit that these assets are, in fact, worth quite a bit more — and that they always were — the smoking gun would be revealed. And so would the fingerprints of all those who helped pull the trigger.
I would hate to think that this is behind the resistance to restore the status quo ante 2008, but sadly, it wouldn’t be surprising. It would also be amazing to think that we wrecked the world economy with a single rule change, and could undo much of the damage by reversing it, but it can’t be ruled out.
[Update a few minutes later]
Commenters are accusing me of naivety, or lack of understanding of the situation, and in rereading my post, I can understand why.
No, I don’t really believe that if the rule hadn’t been changed, all would now be hunky dory, or that by changing it back, housing prices would skyrocket and all would be well with the world, and we’d rewind back to 2006. I understand that there was a huge bubble, perhaps more than one, and that supply and demand had to correct at some point. It’s why, after buying our house in South Florida five years ago, (unlike some of our neighbors) we weren’t going crazy and flipping condos a couple years later.
I am just pointing out that it might have played out differently, or more gradually, and perhaps even in a way that might have resulted in less panic in Washington last fall. I do think that our biggest problem now is not the underlying problems with the economy, which always work themselves out if allowed to, but panicked governmental responses to them that are exacerbating the situation. I do think that mark to market, or at least a sudden change in the rules, played a role in that. I think that it forced fire sales in the banking sector that might have been handled more gradually.
Good Point
A couple days ago, I asked: If Obama really wanted to wreck the economy, would what he be doing differently? Lance Burri has an answer:
How about tariffs? Have we got much in the way of tariffs so far?
Well, no, not yet, though there were some attempts at trade restrictions in some early versions of Spendulous. And he’s made a lot of noise about them in the campaign, but no, so far he hasn’t been that Hoover like. Yet.
My Home-Town Newspaper
…is cutting back to three days a week, with a lot of layoffs and pay reductions. Same thing with Saginaw and Bay City. The Flint Journal has been around for many decades, going back to the nineteenth century, before the auto industry existed, but it looks like it’s on its last legs, as Michigan’s economy continues to swirl down the drain. A good friend of mine from college is an editor there. Hope she has a parachute.
Why Jon Stewart Attacked Jim Cramer
Pethokoukis explains. This really appears to be part of a government/media war on investors.
[Update a while later]
More thoughts on the matter from Mark Hemingway:
Anyone who has tuned into his show and seen Cramer strutting around a soundstage that looks like the helm of the Starship Enterprise as envisioned by the Teletubbies’ set designer and pushing buttons that make wacky sound effects could tell you that Cramer is to stock-picking what The Daily Show is to TV news: something not to be taken too seriously.
Ouch.
Judd Gregg For Treasury Secretary
He made short shrift of Geithner’s lies yesterday. Of course, he would never get the job, because he would never put up with the adminstration’s insane plans:
Gregg said the budget is essentially “putting on our children’s backs a debt they can never get out from underneath.”
He added pointedly, “I think we’re putting at risk not only our children’s future, we’re clearly putting at risk the value of a dollar and our ability to sell debt.”
…”The argument that this budget doesn’t have tax increases [on everyone] is, I think, an ‘Alice in Wonderland’ view of the budget,” he said.
He challenged the budget’s math on cutting the debt: “When you take the deficit and quadruple it and then you cut it and half, that’s like taking four steps back and two steps forward. That’s not making any progress; you’re still going backwards.”
Veronique de Rugy has a pretty scary graph of it:
The Obama administration’s budget, called “A New Era of Responsibility, Renewing America’s Promise,” estimates the deficit for this year will total $1.75 trillion. But things will get better, right? Well, according to Obama’s own ten-year deficit projections (see chart), a New Era of Responsibility produces bigger deficits every single year than during the Bush years: $1.75 trillion in 2009 to $533 billion by 2013 — this budget projects higher deficits in 2014 ($570 billion), 2015 ($583 billion), and 2016 ($637 billion). In 2019, the final year in the budget, the deficit is projected to be $712 billion.
Change! But not much hope.
Megan McArdle is regretting her vote:
Having defended Obama’s candidacy largely on his economic team, I’m having serious buyer’s remorse. Geithner, who is rapidly starting to look like the weakest link, is rattling around by himself in Treasury. Meanwhile, the administration is clearly prioritized a stimulus package that will not work without fixing the banks over, um, fixing the banking system. Unlike most fiscal conservatives, I’m not mad at him for trying to increase the size of the government; that’s, after all, what he got elected promising to do. But he also promised to be non-partisan and accountable, and the size and composition stimulus package looks like just one more attempt to ram through his ideological agenda without much scrutiny, with the heaviest focus on programs that will be especially hard to cut.
The budget numbers are just one more blow to the credibility he worked hard to establish during the election. Back then, people like me handed him kudoes for using numbers that were really much less mendacious than the general run of candidate program promises. Now, he’s building a budget on the promise that this recession will be milder than average, with growth merely dipping to 1.2% this year and returning to trend in 2010. Isn’t there anyone at BLS who could have filled him in on the unemployment figures, or at Treasury who could have explained what a disproportionate impact finance salaries have on tax revenue? These numbers . . . well, I can’t really fully describe them on a family blog. But he has now raced passed Bush in the Delusional Budget Math olympics.
Well, some of us saw this coming. It’s just a shame that the Republican nominee was John McCain. There was no good choice.