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We shall what we shall see. However, the first six months, if they are a harbinger of the next 6 months, pretty much scare the heck out of me. But it's not just Obama that bothers me. I can't give you two cents for Congress and that is worse than an empty suit President, IMO.
Conjecture around the net that Obama secretly wants Summers to take over the Fed. He may want to survey Harvard profs first, though. This bad theater reminds me of the grilling General Petraeus received from the dunderheads on the hill. I shouldn't be too harsh, I guess. We do have the best Congress money can buy.
Toggle Commented Jun 30, 2009 on The Fed vs the Politicians at The Skeptical Optimist
Yawn. Talk is cheap. Wake me when our energy mess is being addressed without solar panels and food for fuel. Here's my 5 month report card. This is the evidence I am weighing thus far. Energy. F, thus far. Conserve and hunker down. Chrysler bailout. F. Chrysler should have been vulture fodder. GM Bailout. D. Not an F because I'll give on the systemic issues. We'll never see a return on the $50 billion though. Stimulus plan. No grade yet. Health care. He's focusing on insurance when we should be focusing on costs. He told the AMA no tort reform. Quick quiz grade. F. Financial system reform. No grade yet but haven't addressed Too Big Too Fail. Meanwhile, Bobby Jindal gets it: http://www.ledlouisiana.com/news--multimedia/news-releases/new-american-car-company-will-make-history-in-louisiana.aspx
EA and all others who will dis the chart. The numbers are the numbers! Maybe that $40 Bill will make a difference. But as of the dates the real world data is worse than the assumptions. Maybe the administration miscalculated the short term losses. If so, what else did they miscalculate? We don't know because we don't know what their calcs are.
You think this is fuzzy? Wait until the Pres. starts touting all the "green" jobs created. Don't be too hard on him though. The BLS projects that from 2006 through 2016 the federal government will shed about 90,000 employees, ex post office. http://www.bls.gov/news.release/ecopro.t03.htm
Steve, I've been following this blog for around 2 years or so. You've converted me to the idea of growth and that the national debt is not of major concern if it enhances future growth prospects. So you're basically preaching to the choir. Unfortunately I see nothing that gives me hope that growth is on the national political agenda. For me, it's simple. It begins and ends with energy. Thus far the collectivists in government (and my read is that Obama is a card carrying collectivist) want us to conserve out way out of the energy problem. I have no problem with conservation per se' having spent many a year in demand side management. It's just that one reaches a point of diminishing returns after the cherry's have been picked and focus needs to be on the supply side. For many energy conservation projects to achieve a competitive return on investment we need energy prices to rise to a point in which projects become more financially viable. Or, we can make them appear to be viable through credits or subsidies but all that does is offset the higher prices. To make matters worse cap and trade and the enviro-fascists virtually guarantee that prices will be on an above trend increase, IMO. And the people that get hurt the worst are the those that this administration appears to want to help the most. This can get circular in a hurry and we go nowhere fast. In fact, we've been in nowhere land for many a year. So, if you are inclined to make more entries about stuff such as nanotechnology, I, for one, would welcome it.
Steve, Trend lines are rear view mirrors, right? What would you need to see from the administration and Congress that would give you hope that, in 12 or 18 months, real economic growth, sans government stimulus, could be on a steeper trajectory?
Some observations: I'm intrigued by Phelps' theory of imperfect knowledge wondering if there is a Karl Popper (who, philosophically mused the same) link there. Bernanke recently gave a commencement address in which he acknowledged that despite all the advanced computational power, access to data and other tools the Fed's prowess at forecasting is underwhelming. A while back Steve posted about what he saw as disingenuous remarks about people hoping that Obama is successful. Unlike a certain radio personality I consider it to be in my best interests for any President to succeed as long as I can share in that success. That stated 4 plus months into the term I'm a bit concerned. Looks like Goalsbee, like Volcker, has been relegated to the shadows somewhere. It's Summers show or at least is appears so. My personal preference is for the government to do very little "investing" if any at all. I'm not sure the track record is all that great, GI Bill and the Interstate notwithstanding. Paul McCulley at Pimco reportedly said to a group: "If the PE of FedEX is 12, what should the PE of the U.S. Post Office be?" However, if the Government is to invest I'm thinking that energy is the industry to do so and no I don't mean windmills, food as fuel and solar panels. Why we don't look at an abundant natural resource and find ways to clean it up is beyond me. We've highlighted real systemic problems in our financial system what with all the greed, crooks and other despicable people. Why haven't the enviro-fascists gotten the same treatment? Just when I'm trying to become more optimistic...they suck me back in! (With apologies to Micheal Corleone).
Steve, I read both articles re: Taylor. My take is that there is congruence in terms of monetary policy but not fiscal policy. In other words keep the cost of borrowing real low but rein in the government spending. Apparently he's concerned that the stimulus will be more permanent.
Toggle Commented May 27, 2009 on Inflation Watch at The Skeptical Optimist
Why not include the PPI or some of it's relevant components? Seems to me that it would be indicator if potential price inflation in the pipeline. Isn't it a little early to start worrying about inflation? High unemployment rate, commercial property rents falling (and increasing vacancies), vehicle sales in the tank, etc.
Toggle Commented May 27, 2009 on Inflation Watch at The Skeptical Optimist
ObamaMotowerks 1, that would be the *new* Chrysler, has about 30,000 or so 2008 models hanging around. How about Git Mo For Your Dollar Auto Sales or gitmoauto.com? He could ship all the unsold models there, dress the residents up in checkered coats with white shoes ( a pic of them blowing up balloons should satisfy the loony left) and turn the thing into a giant car dealership. I'm sure someone on his budget and forecasting team could come up with some great numbers justifying a fast return.
Knee-jerk reaction: 1. In terms of GDP, Projections 10 years out are meaningless, IMO. Five years is a stretch if you ask me. Besides I can fit any set of assumptions to make the future look good so I can do what I want now. 2. Just where is the growth going to come from? Will this administration do a 180 and embrace entrepreneurs? 3. Does anyone really believe that the government has now or will have the requisite skills and discipline to use them that gives one confidence that their "investments" have been subject to the kind of scrutiny that private enterprise performs?
One should not be flabbergasted that the new administration is causing consternation. President Obama, aside from his change of position on NAFTA, Gitmo tribunals and the recent refusal to cut loose terrorist prisoner photos, is behaving exactly as he said he would. Personally, I'm finding this to be a quirky start...even weird. While I hold out hope that this rookie will come around to a more moderate policy, I fear that the undercurrents are such that we are being pushed along a path that will lead us to a zombie-like underachieving nanny state.seasoning my rational self tells me that attempts will be made to dramatically alter
Steve: Venture over to Mankiw's blog and find that he does not buy in that Obamanomics can be measured. Meanwhile Pimco's Gross in his May letter sees slow growth ahead. Perhaps tax rates won't go up soon but the tax rates set to expire next year most certainly will, IMO. For me the scenario is simple. 1.The environmentalists have politically hijacked any form of energy policy (an oxymoron since we don't' have a policy). Energy will do bc in long before the boomer's do. 2. I can't envision a viable exit strategy for the government with Chrysler and GM. I'll be watching it closely but the way this has gone down is bizarre.
Toggle Commented May 13, 2009 on Mis-remembering Jack Kemp at The Skeptical Optimist
Mox-nix on the talk about low taxes. Is there any reader of this blog that believes taxes will not increase? If so, why that belief? Perhaps we can grow our way out of servicing what is now a massive, indeed gargantuan, debt. However, what will cause that growth? If all eggs are in the Singularity basket then what is Plan B if that event proves to be fleeting? If we are to rely on the government and this administration to adopt pro-growth policies what are the indications thus far that we will see such policies emerge?
Toggle Commented May 13, 2009 on Mis-remembering Jack Kemp at The Skeptical Optimist
"'ll take wide-eyed leftist at least he has an open mind and can be taught " BC: Not to pile on but I had to chuckle at that statement. I have never met a liberal that can be taught anything other than liberalism. I'll concede that an idealistic youth may become more, er, conservative after they take on real world responsibilities (provided they can handle responsibility at all) though I know many liberals of the boomer generation that still live in a fantasy. Somehow I think they are wired that way. BTW, I'll contend that Obama won in part because McCain ran a completely inept campaign. Still, if the meltdown would have happened after the election, it could have been a lot closer.
The old "carrot or stick" isn't it? I like carrots - sticks, not so much. Does Nudge have a website and blog? Of course it does and it's now in my bookmarks. I'm not sure about a nudge, though. It implies a slight push and I'd rather have a pull. Now the non-TARP GM and Chrysler senior unsubordinated bondholders may call their nudge a 15 pound sledgehammer. Sorry, I had to get that in.
"anyone have any guesses on how high interest rates will get in coming years?" I don't have any guess but don't buy in that the great inflation of the seventies will repeat. Let me explain: 1. Anyone who worked in that era remembers COLA's. Cost of living wage increases were common. I remember a 7% automatic raise. What is the chance of that repeating? Pretty low, I suggest. For the last 15 years or so most folks are happy with a 3% increase and that's with a darn good review. 2. Much has been written about the baby boomers. I am one and suggest that the demographic demand from the boomers, specifically as it relates to first time housing, and the supply constraints in effect contributed mightily to the great inflation. This time the reverse may happen. As boomers retrench from spending aggregate demand could recede. 3. The big caveat in all this, IMO, is commodity prices. I'm confident that the labor percentage of manufacturing will continue to decline due to improved productivity but I'd watch raw material prices closely. If it were me taking a look at closer oversight of the financial markets, I'd hone in on commodity speculation.
Steve, Few questions. 1. In your view what does cause long rates to increase? 2. What is the long rate threshold after which economic activity could contract? 3. At what level of debt are you going to get concerned if the economy only grows at a 2-2.5% real rate? I know you're looking at a 5% or so real rate to service the interest but that looks awfully iffy for the foreseeable future and our DEBT/GDP ratio is moving north darn fast.