James Pethokoukis

Obama stimulus: promises vs. reality

September 4, 2009

This from the WaPo:

IHS Global Insight, an economic consulting firm, estimates that the stimulus has increased the 2009 gross domestic product by about 1 percent over what it otherwise would have been, with the benefit almost entirely in the second half of the year.

The worrisome fiscal situation of states

September 4, 2009

A fun factoid from Gov. Mitch Daniels of Indiana shows just how much trouble states are in (via WSJ):

More on August unemployment

September 4, 2009

I will say, though, that the worst-case scenario for unemployment is fading fast as this chart from economist Robert Brusca shows. (Though one cautionary note: watch out for more state/local government layoffs).

August unemployment at 9.7 percent; 216,000 jobs lost

September 4, 2009

The unemployment rate in August jumped to 9.7 percent from 9.4 percent. The economy lost another 216,000 jobs. While the economy may be shifting into recovery mode, the labor market clearly still needs lots of work. The best-case scenario I can find (4 percent GDP growth next year) still would have the jobless rate at 8.5 percent or so a year from now. Also note that the labor force participation rate remained steady last month. So the blip up in unemployment was not caused by discouraged workers returning to the workforce. Also the broader U6 rate surged to 16.8 percent.

Gold is nowhere near its old highs

September 3, 2009

A great factoid from the Calafia Beach Pundit, Scott Grannis:

Gold prices peaked in January 1980 at $850. In today’s dollars, that would be equivalent to $2,300. (The chart shows a peak of $1,800 because it uses month-end data.) So in rough terms, let’s say that gold today is worth about half of what it was at the peak of the inflation fears in early 1980.

The Obama stimulus reconsidered

September 3, 2009

I listened to VP Joe Biden today talking abut the Obama stimulus package, aka, the American Recovery and Reinvestment Act. A few thoughts:

The consequences of massive budget deficits

September 3, 2009

The Cleveland Fed gives the bad news:

First, without a correction on the spending side, more tax revenue will need to be raised, with the consequence of subjecting the economy to greater tax-associated inefficiencies.

Another vote against a super-regulator

September 3, 2009

Edward Harrison has an interesting and worth-reading take on financial reform :

I propose the following: Shelve any talk of a super-regulator.  It is a dangerous idea that will prove both politically unpopular and ineffective. Enforce the regulations that currently exist. For example, anti-trust law should prohibit any institution from holding more than 10% of banking assets. Another example is the Home Owner Equity Protection Act of 1994, which gave the Federal Reserve the authority to stop abusive mortgage lending practices. Promote smaller community banks. The Bush and Obama Administration’s policies during this crisis have favoured big banks. Meanwhile, community banks are being held to a disadvantage in access to cheap capital. Why doesn’t the FDIC spin off seized assets as small community banks with new leadership instead of gifting them to private equity or other banks? Regulate OTC derivatives. Full-stop.  No clearinghouses. No loopholes.  We need an exchange-traded OTC derivatives market. (listen to the audio at the bottom of this post to hear how lobbyists gutted the OTC derivatives regulation in Obama’s reform package). Keep the Consumer Finance Protection Agency. If we want any new regulators, this is where we need them.  The Fed failed to protect consumers from abusive mortgage lending practices and there is now a balkanized regulatory structure to oversee consumer protections. The CFPA would change this.

Bill Gross and America’s ‘New Normal’

September 3, 2009

Pimco’s Bill Gross paints a dreary future is his monthly letter:

We are heading into what we call the New Normal, which is a period of time in which economies grow very slowly as opposed to growing like weeds, the way children do; in which profits are relatively static; in which the government plays a significant role in terms of deficits and reregulation and control of the economy; in which the consumer stops shopping until he drops and begins, as they do in Japan (to be a little ghoulish), starts saving to the grave.

Tobin taxes: a bad idea whose time should never come

September 2, 2009

American unions. Democrats, anti-globalization wreckers and British regulators may love the idea of financial transaction, or Tobin, taxes, but not me. Here is why (some of these points came from a great article by  Dan Matthison of Credit Suisse):