Can Obama Stop the Panic?
The Lame Duck has laid an egg on the economy, and nothing better can hatch until he gets out of the nest.
Tomorrow the President-in-Waiting-Who-Can’t-Afford-to-Wait will announce his financial dream team and game plan as panic buttons are being pushed all over the world.
*On Meet the Press, Bush family Consigliere James Baker, who muscled W. into office in 2000, now suggests he vacate early by sitting down with Obama now “to see if there isn’t something that they could do jointly, together, over the next 58 to 60 days that would help us make sure that the financial system is stabilized and secure,” warning that “this thing is even, believe it or not, going to get worse…(S)itting down together and seeing if there’s not one thing that they could come together on would do a lot to restore confidence and remove the anxiety and fear that’s out there.”
*Senior adviser David Axelrod says Obama “wants a plan big enough to deal with the large challenges we face. And I think there’s a growing consensus across the spectrum among economists that we’re going to have to do something big,”
*The International Monetary Fund’s Chief Economist predicts “The worst is yet to come” in the universal liquidity crisis.
4 Responses to “Can Obama Stop the Panic?”
“The worst is yet to come.”
Yes, I think so, too. Though I would prefer for a hard landing (in the stock market now) than a landing that takes another year or so to come about. The stock market at this point is pretty much a self-fulfilling prophecy…. the more people think it will go down, the more it will go down. Half steps taken now will only prolong reaching the bottom, which will be lower the longer it lasts. If it's a hard landing now, then we can start to recover.
It's really amazing how much the economy is tied to investor sentiment. That's one thing I've learned so far out of this mess.
You know things are bad when Baker wants the incoming Dem. President to get to work faster.
Those of us who are still adults despite the childish, stupid panic and worse, the irresponsible sensationalist hype. (Fortunately for you, we don't play with your minds by discussing deflation and other things more than are merited.) If we were meant to experience deflation for some years after sordid stock-market (compounded by Internet idiocy) and real-estate bubbles, it was meant to be. The choice we have now is to let things sort themselves out, which normally is wise given the harm government routinely does, or to attempt to logically intervene to forestall deflation (a sensible goal to have) and possibly to prevent future problems by learning from what succeeds and fails now as well as in Japan in the previous decade. Most of us want intervention and the rest of us will accept this (in part because the 2008 election verdict implies this decision is inevitable, also because this is an intriguing subject, through which we're all going to be forced to live through somehow anyway). As for investor sentiment that Stockster has noticed, others have noticed this as well — as with the sillier things posted on this site, so it is with so many investors, who are to this day woefully ignorant of what is happening, have next to no emotional control, or barely see past their noses. Knee-jerk instinctive reactions involving Citi stock after the Citi bailout announcement have served as the latest illustration of this.
The author of a book that is prescient about this has written elsewhere — he is a normal person, i.e., favoring the free market, but is willing to look at intervention and even demand it if he believes it is appropriate or even imperative (in order to forestall deflation). I may quote from the book later; here is what he recently wrote in an up-to-date article about the situation we face. Be calm, people, and just consider what may or may not work, think about your own details of what you might want to see not only next year but in the next _four_ or more years (not necessarily in a slump that long, but in terms of long-term interest of the nation and what the federal government could to to improve it), but realize that we've had slumps before, and intervention has helped before. (At other times, it has not helped and even harmed things, so don't have naive, blind, silly faith in government salvation.)
The most important thing, Do we want to try to forestall deflation? A broader slump in the economy can be addressed at the same time…
http://www.telegraph.co.uk/finance/comment/roge…
Stockster, you're right about half steps, or measures. Even full steps or measures in the case of many a bailout is feared to prolong things, such as what people think of the building industry that, naturally, wants a bailout from the federal government. As far as investor sentiment, I will await sentiment of everyone in the economy and how it is exhibited, once intervention is attempted. The financial institutions given bailout money aren't lending it — nor are they obliged to, especially to poor risks (a large part of the problem that has now materialized). Public spending and tax reductions may or may not improve economic activity. People may well decide to save, or to engage in debt service, or simply reduce their expenditures even if they get more money in their hands, if they have concern about the future, never mind any developing deflationary expectations (observing falling prices and learning to postpone spending in order to enjoy lower prices in the future).
Obama's “2.5 million jobs” promise is laughable, as is any fixation currently on “green” jobs or anything else; rescuing the economy overall, in general, comes first and foremost. That means fighting unemployment and related costs — as undeserving as Detroit is (which is to say, accurately and morally, highly undeserving, not at all, in fact) of a bailout, something will probably be done. I'm also interested in any kind of employment and improvement-related actions in the realm of bridge and road repair and replacement (and even building new highways — Los Angeles metro could use two large, all-new freeways and one or two other sections of freeway to reasonably complete its network, for example) and in repair of old, substandard, perhaps-foreclosed housing (this would be a better way of steering money to the building industry than merely handing it money as they now want). Aside from any strictly economic matter, I'm interested to see what changes are sought by the Obama people. The $500M figure he's using is perfectly reasonable and leaves probably another trillion on the shelf ready to be used if we gauge or scale intervention in terms of China's recent “breathtaking” intervention amounting to 15 per cent of gross national product. $500M now and a trillion on hand is not out of line if a major intervention is to be sought, _and_ it leaves the other money on hand as well for other projects like health care provision and control (or at least, nominally, “financing” or “paying” for it by Washington, in reality with strings attached) as well as, say, clean-energy R&D and possibly new federal financial aid for higher education (not to be neglected, either).