02/06/09 Baltimore, Maryland Time’s a-wastin’ for the new president if he has a prayer of staving off the appearance of a financial Black Swan during February.
Yesterday we saw how an Internet rumor now nearly a year old has proven remarkably accurate, at least in its early stages. The U.S. economy might not have “collapsed” last September, but for most folks, what did happen was too close for comfort.
The next part of the “prophecy” is “the collapse of U.S. government finances” this month. Again yesterday, we saw there’s no shortage of candidates to trigger such an event. And it sure doesn’t help that today the jobless numbers are worse than forecast.
It wasn’t supposed to be like that for the new president and his team. Wasn’t he supposed to be the second coming of FDR?
Yet the contrast is significant. FDR’s “first hundred days” brought one bold move after another, including a bank holiday called the day after the inauguration. For the moment, let’s leave aside free-market objections to the folly of the New Deal; I’m addressing the matter of raw emotion, both among finance types and the general public. All those bold moves, however misguided they were, had the effect of instilling a certain amount of confidence, however fleeting it turned out to be.
But what have we got from the first two and a half weeks of this administration? For starters, nonstop hemming and hawing about a “bad bank” to buy up toxic assets. It appears that idea’s about to be put back on the shelf because the hacktastic Sen. Chuck Schumer (D-Banksters) doesn’t like it. He’d prefer “not for the government to buy the assets but rather to guarantee them”.
I feel like Bill Murray in Groundhog Day. Wasn’t the “bad bank” concept basically what Hank Paulson first had in mind for the TARP money, only he changed his mind after he was told it wouldn’t work? Why yes, it pretty much says so right here in this Financial Times article.
And whatever form “Son of TARP” ends up taking, it will be formulated with an eye toward growing public disgust with the banksters and the Team Obama appointees who’ve been called out for not paying their taxes. Whenever it turns out to be, it will be Tim Geithner’s one and only chance to demonstrate to the markets that he’s not the second coming of Paulson. Right now, that’s looking like a steep wall to climb.
Meanwhile among the general public, more people now oppose the “stimulus” bill than support it. Doesn’t matter how high the new president’s approval numbers are if they don’t translate into support for his biggest legislative priority. The man who appealed to “hope” throughout his campaign now appeals to fear in an attempt to push it through.
Not exactly the FDR playbook; indeed it amounts to the antithesis of bold action (even if it’s foolish) that inspires confidence (even if it’s misplaced).
We’re six days into the month. It’s 28 days long. Black Swan potential is high. We shall see.
Black Swan by David Gonigam:
Well do you think most people would be better off with McCain in there? Things haven’t got as bad as they were when FDR came in, at least not yet! I am sure Obama would have more support if we had 25% unemployment. Those sociopaths who don’t deserve to live such extravagantly and lavishly will pose a problem for Obama because they haven’t lost everything the way so many of those people did when FDR came to office. So if you think you have any better answers other than unleashing your harsh liberterian ideology that would leave most people destitute, I suggest you bring them to the forward
Mike says:
“So if you think you have any better answers other than unleashing your harsh liberterian ideology that would leave most people destitute, I suggest you bring them to the forward”
Can you define “harsh libertarian ideology” for us? (and it’s “libertarian” not “liberterian” – the e isn’t by the a on the keyboard for a typo, so I will put your mistake down to you being uninformed and unfamiliar about/with libertarianism and Austrian Economics)
If you are referring to the fact that most libertarians having familiarity with Austrian Economics would suggest letting the market clear the mis-allocations of resources brought about by the FEDGOV utilizing the Central Bank to artificially lower interest rates and utilize fiat currency, then I would suggest that you explain to all of us how taking on more debt to continue supporting corporations that mis-allocated resources will provide a higher standard of living in the future for everyone.
It won’t – it will lower everyone’s standard of living even further than if we clear the market right now. You can stop the mis-allocations now by clearing the market with a sink-or-swim approach, or you can keep the mis-allocations going by propping up inefficient/unprofitable corporations with taxes.
It appears that individuals of your mind-set want a short-term “faux-solution”, while a libertarian wants a long-term structural assessment and solutions that fit – you want the little kids “solution” (if, as I believe, you are advocating continual mis-allocation of resources at the populations expense) that doesn’t “look past tomorrow”, while libertarians want an adult solution that looks much farther ahead than “tomorrow” and much deeper than “lets just throw more resources at it”.
I again suggest that you bring forward explanations that show why and how the continued mis-allocation of resources in support of non-productive corporations improves the standard of living of the population and doesn’t hasten the economic collapse of the United States.
Things haven’t got as bad as they were when FDR came in, at least not yet!
That’s nothing but timing. The Crash happened in Hoover’s first year, and he had three more years to bugger up the works with Smoot-Hawley etc. The economy had pretty much bottomed out by the time FDR took the reins (and he duly proceeded to keep us there for a decade).
This one got going in Bush’s last year, and is still developing. Assuming the pattern repeats, the bottom is in 2010.
Well, well. Four of Obama’s appointees didn’t pay their taxes….but he expects us common folk to pay? I’m thinking that unless Obama directs the IRS to fully audit every congressperson in both houses for the last three years – plus ALL of their staff, I’m inclined not to pay my taxes either.