James Pethokoukis

Politics and policy from inside Washington

Obama stimulus vs. Fed stimulus update …

Jun 15, 2009 13:48 UTC

A stimulus update from my guy Dan Clifton, super-analyst at Strategas Research: “Through June 5th, about $46bn of stimulus spending and $10bn of tax cuts have been enacted (total $56bn) via President Obama’s $787bn stimulus package (7.1%).”

Now let’s compare that to what the Fed’s been doing (via the WSJ):

Since the onset of the financial crisis nine months ago, the government has become the nation’s biggest mortgage lender, guaranteed nearly $3 trillion in money-market mutual-fund assets, commandeered and restructured two car companies, taken equity stakes in nearly 600 banks, lent more than $300 billion to blue-chip companies, supported the life-insurance industry and become a credit source for buyers of cars, tractors and even weapons for hunting.

The timing of the Fed exit strategy

Jun 15, 2009 13:41 UTC

When will the Federal Reserve begin to execute its exit strategy? Well, as far as the interest rate component goes, keep an eye on the job market.  At least that is how economists John Ryding and Conrad DeQuadros see things:

It is an empirical fact that since the Fed adopted interest rate targeting, it has never made the first move to hike rates after a recession until the unemployment rate had peaked. Although the funds rate target is unusually low, at 0%–¼%, it is also the case that the unemployment rate is unusually high, at 9.4%, and expected (by both ourselves and the Fed) to move higher. In the post-war era, only the 1981-82 recession has seen a higher unemployment rate than the current rate and that recession was accompanied by a rapid disinflation from 10.4% at the start of 1981 to 4.7% at the start of 1983.

Higher rates and refinancing

Jun 13, 2009 12:52 UTC

Fear of massive deficits and inflation may or may not be driving up interest rates, but the impact of the rate rise is not up for dispute. This from Barclays:

Mortgage rates jumped to their highest since November, stifling refinancing

The Mortgage Bankers Association’s index of mortgage applications fell 7.2% w/w in the week ending June 5, marking the third consecutive weekly decline. The downturn owes to a sharp drop in refinancing activity as a result of higher mortgage rates.

The index of refinancing applications fell 11.8% in the latest week, pushing the index to the lowest level since November of last year (Figure 1). The index of purchase applications inched up 1.1%, leaving the four-week moving average up 0.5%.

The average rate on the 30y conforming mortgage (as measured by the MBA) jumped 32bp to 5.57%, also the highest since November. Mortgage rates have jumped more than 100bp from the trough of 4.62% at the end of April.

If not for Obama, would the US be Spain?

Jun 12, 2009 18:08 UTC

Matthew Yglesias says if not the Obama stimulus, the US would be in the same bad shape as Europe where the economy is supposed to shrink 4.2 percent vs. 2.8 percent here. I think this says more about a) the underlying deep power of the American economy. b) the Fed’s monetary stimulus rather than c) the 5 percent of the $787 billion that already out the door.

COMMENT

America would be better off without his stimulus. The market would have purged itself of most of these problems by now if the feds would have stayed out of it. We are in much much worse shape now and will be for a good while to come. I think this says more about the corrupt connections between Wall Street, the military industrial complex, and the federal government than any underlying deep American power. The only power we seem to have is our global military. Exactly the type of connections we as free, constitutional people are supposed to oppose.

Posted by jason | Report as abusive

Obama’s gas price conundrum

Jun 12, 2009 17:52 UTC

This American Thinker post explores the political fallout of rising gas prices on the Obamacrats. (Gas was a $1.80 when Obama took office.) When gas prices soared in 2008, the Dems hammered Bush and the GOP. But super-high prices ended up being a plus for the McCain campaign since he was arguing for an “all of the above” energy policy (more driling and nukes, not just alternative energy) which strikes most people as a pretty reasonable approach.  If we head back to $3.50/4.00,  the Obamacrats could get hit by a double whammy — public unhappiness at high gas prices and at the administration’s refusal to move beyond a green approach.

COMMENT

It’s so amazing that we throw ten dollar words at an economic problem that no one has acknowledged yet. High gas prices mean more dollars spent at the pump. When you put $40 more into your tank per week, you spend less else where. The housing problem was not the only contributer to our economies down fall. Yet, it still gets top priority while gas prices sneak up. The housing market has always been headed down a steep gully. For years people have lived pay check to pay check and over their heads with debt. Change the gas prices and Americans stay home and shop way less. Obama’s tenure as yet, has failed to recognize how important gas prices are to Americans! Charge the OPEC countries the same for wheat that we spend for gas and watch the price go down. We have no guts in our government to use US goods and services over seas as a marketing tool. By the way, this topic was not an issue during the election: trade practices and supporting American goods and services.

Posted by Lesli | Report as abusive

Cap-and-trade off the table for 2009

Jun 12, 2009 12:50 UTC

That is the conclusion of this Reuters story. But how about 2010? Here is the money graf:

Two obstacles stand in the way. First, advocates must convince the public the bill, which might initially raise electricity and other energy prices, will ultimately save money by heading off damage caused by global warming. … One opponent, the Coalition for Affordable American Energy, whose members include the influential U.S. Chamber of Commerce and about 200 other organizations, has estimated climate legislation could cost U.S. households $1,400 per year by 2020. … Second, experts said the bill must include nuclear energy, which is nearly emissions free but comes with other problems such as toxic waste. Claussen said a resolution on nuclear power could help the Senate reach the required 60 votes for the bill’s passage.

Me: Unless money from cap-and-trade is fully refundable to consumers, I don’t see it happening. And if it excludes nukes, it seems like a fantasy plan untethered from political, economic or scientific realities.

COMMENT

I aggree with your comment. Until will embrace the idea of nuclear power; we are never going to make any efforts to stop global warming.

Posted by Jason | Report as abusive

Will Obama fire his accountants?

Jun 12, 2009 12:45 UTC

Some Democrats want the costs of healthcare reform to be judged by the White House Office of Management and Budget, not the nonpartisan Congressional Budget Office. As The Hill explains: “This unusual option could give Democratic leaders hundreds of billions of additional dollars to work with as they draft their plans. But Republicans would call it an accounting gimmick and a huge spending loophole.” It doesn’t need to be said, but I will say it: If the Bush White House would have tried a stunt like this, the Dems and the MSM media would have screamed.

Obama’s healthcare rebuke

Jun 12, 2009 12:35 UTC

More and more it looks as if a public healthcare insurance option won’t happen, at least as originally imagined by President Obama and liberal Democrats. Republicans won’t vote for it, nor a sizable number of centrist Democrats. Now they are talking about state or regional cooperatives that would provide a pubic option of sorts. So how goes the liberal agenda? Consider: No federal government healthcare option, no cap-and-trade energy plan with the allowances auctioned and only light limits on CEO pay. But at least we are still running trillion dollar deficits!

How financial crises are like earthquakes

Jun 10, 2009 18:58 UTC

They both seem to follow a mathematical relationship called a “power law” where you have lots of small events trailing off into infrequent but much bigger events, according to a McKinsey study. (So don’t assume stability, look into the deep past not recent history, look for early warning signs and study complex systems. ) Now this is a great chart from the McKinsey study:

power-curve

COMMENT

The actual Stock Market top (where we are now) has been zigzagging too much.
But the charts warn that any time soon comes the plunge DOWNWARDS.

Schpekulant Suggestions:
1.Keep your money in a safe place. Examples?
Cash
Low-expense Bond mutual funds
Investment-grade bonds
Short and long term Government Bonds
2.Resist temptation to buy stocks just because they look very cheap.
3.Wait. (For many traders and investors this is the most difficult)

Remember you have been warned……….

Remember also that this is just a suggestion, everyone is responsible for his own
investment decisions…. YOU have to take care of your own money.

Chaim Kimelblat aka Schpekulant@gmail.com
Listen with your Brain

Posted by Chaim Kimelblat | Report as abusive

Comment of the day …

Jun 10, 2009 17:05 UTC

I may never get a better comment than this one from my post about the $2 trillion cost of climate change legislation:

Personally I wouldn’t be upset if the human race perished, it’s the plant and animal life that doesn’t have a say in all this that I feel sorry for.  Hopefully they’ll fight back before it’s too late.

Me:  This sounded so familiar. I searched my mental memory and eventually recalled a Space: 1999 episode based on this very premise.

COMMENT

Please have reader refer to the book “ISMAEL” written by a buddhist in the 90′s i think. Ismael was a talking gorilla locked in a cell. He stated that the myth of Genesis is that “God” gave power to man to do what he saw fit with the earth. Ismael says this is a false assumption and that man is the one who is destroying is own species. He says to the reader that civilization is like a 747 that has fallen over a cliff 10.000 years ago. We just have not crashed yet.

Posted by bruce k miller | Report as abusive
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