MacroScope

A new hope?

November 25, 2008

Maybe, just maybe.

While it’s way too soon to sound the all clear, analysts see some cause for optimism behind the latest government effort to restore credit markets to working order. All it took was another $800 billion.

It’s no quick fix, but by backing consumer lending, the U.S. Federal Reserve and Treasury Department are concentrating on the most important segment of the U.S. economy. Gary Balter, a retail sector analyst with Credit Suisse, summed up his assessment in a one-word headline: “Finally.”

“The steps being taken today may slow the bleeding but more job losses will occur into next year. We do not see an escape from that. However, what has changed on the margin in the last two days is that the government is doing what needs to be done to unfreeze the credit markets, which points to hope and a potential bottom to the economic issues in 2009. As we show inside and is well known, there is a very high correlation of consumer spending with availability of credit.”

(More analyst comments are here.)

Not that we needed another reminder of how bad things are, but Tuesday’s gross domestic product figures showed just how sharply consumers have pulled back. Consumer spending fell 3.7 percent in the third quarter, further than initially reported and the biggest drop in 28 years. Economists predict at least two, possibly three┬ámore quarters of declining GDP, but perhaps now the recovery will be more robust.

Comments
5 comments so far | RSS Comments RSS

Going into debt to solve problems caused by debt is always a rational and viable solution. What is all hubbub about?

Posted by Russ in PA | Report as abusive
 

It seem’s to me that the people who run the bank’s also run the world.
Well can I make a suggestion,give the power back to the people by demanding that the government’s(haha)open there own bank and start making money for the people,then you can drop taxes and forse the economy however you wish, after all you cannot go into bankrupsy because you the government’s would be monerating it perfectly.
Do not let the bank’s rule over you. Rule over the bank’s.
Your buisness as a government is to look after its people,so start doing it and stop giving all there money away and go to work as a world governing body that is there specificly to make good the world.

Posted by Jeff | Report as abusive
 

Not so much a comment but a question: If affordability doesn’t go up, how is this going to help consumers if Rahmn Immanuel’s figures that people are making $2,000 less in the past eight years and core costs (fuel, credit, health care) have gone up $4,800? It seems part of the consumer pull back is due to having less money and higher prices. I believe Bruce Norris an analyst from California who predicted the bust and the reason why (affordability) still has a valid point. If you can’t afford it, it doesn’t matter how much money you throw at a problem because it’s not going to help you. I’m a prime example of that.

Posted by Robert | Report as abusive
 

So if I wish I could afford a little more heat and groceries–necessities–am I going to get a loan–no matter how credit has eased, whatever that would mean to me personally–to buy an HDTV or car or even jeans on credit? Don’t make me laugh. The experts are out of touch with how good hard-working people are having to live. Don’t talk to us about easing credit or a jobs program two years in the future. Consumers–for the sake of the economy, for GDP–need a bailout now, need money to grease the wheels of the economy now. It’s the consumer that can’t be allowed to fail. Let the automakers crash, stop all corporate bailouts, and bail out the consumer. If it’s enough billions, it will trickle up to the manufacturers and retailers and stock market and the rest.

Posted by J.C. | Report as abusive
 

Not constitutional: Corporate bailouts and nationalization and federal takeover of businesses. Not. For a clear explanation as to why and what can happen, see: http://www.cato.org/pub_display.php?pub_ id=9729 . But we knew this–of course we knew it was against the Constitution, and government officials well knew it.

Google for “bailout constitutional” for more. Stalin and Mao must be laughing their heads off. Citizens need to take action, and will, if they remember “All that is necessary for evil to triumph is for good men to do nothing” (Edmund Burke).

Posted by June Cheatwood, Virginia Beach, VA | Report as abusive
 

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