Entries categorized as ‘Recession’
While the Chinese are hell bent to be number one in the world manufacturing alternative energy equipment, were battling over where to place the damn turbines.
While most lawmakers accept that more renewable energy is needed on the nation’s grid, the debate over the giant climate-change and energy bill now before Congress is exposing a fundamental rift. For many players, the energy not only has to be clean and free of carbon-dioxide emissions, it also has to be generated nearby.
The division has set off a fight between Eastern and Midwestern politicians and grid officials over parts of the bill dealing with transmission lines and solar and wind energy…
For example, a wind machine in North Dakota would produce more energy than the same machine in some Eastern states — but energy projects tend to get built in places where they are most wanted.
The East Coast advocates may have won a crucial first round. When the House passed its sweeping energy and climate-change bill on June 26, it included a provision that lets the federal government overrule state objections to new power lines — but only west of the Rockies.
Can’t anyone look beyond their petty regional interests? Labor is totally mobile in this society. If the good jobs in the wind turbine business are best situated in North Dakota, then the workers will go there. China is going to grow at 8% this year and we’ll be lucky if we grow at 1% and these assholes in Congress are fighting over the placement of deck chairs on the Titanic.
Categories: Business · Energy Policy · Recession
Tagged: solar power, wind power
My wife an I went out for a Sunday stroll today in Santa Monica. On Montana Avenue, the chic shopping street, every third store is empty with a for lease sign in the window. A year ago our U.S. personal savings rate was almost zero and by next month it will be over 6%. Besides saving more we are beginning to pay down our credit cards. Earlier this year household debt as a percentage of disposable income was 134% up from 68% in the early 1980’s. My Princeton classmate Vince Farrell notes that this is a huge difference.
Disposable personal income is close enough to $11 trillion that we can use that as a number. If household debt were to retreat to, say, 100% of income, it would be a retrenchment of a good bit over $3 trillion. That would be one big bite out of consumer expenditures. I have no idea where this debt to income will or should go. Things tend to revert to the norm over time, and if we were in the 70% range in the 1980’s, I don’t think returning to 100% is a crazy view. If the savings rate were to return to its 70-year average of 9%, that would chip in almost $1 trillion a year.
Vince is saying that the consumer’s reversion to a cosmology of thrift will take $4 trillion out of annual consumption which represent 72% of our GDP. (more…)
Categories: Barack Obama · Business · Defense Policy · Economics · Military Spending · Politics · Recession · Technology · Trade
Tagged: Barack Obama, Great Depression, Larry Summers, Mall Closures, overcapacity, Personal Savings Rate, Vince Farrell
A one day summit of the 20 nations that make up 80% of the world’s economy is really nothing more than a posturing exercise for roosters like Sarkozy of France and Hu Jintao of China to show their home market that they can stand up to the U.S.. Last week the Chinese suggested that the dollar be replaced with a new “world reserve currency”. Good luck with that.
The dollar is the world’s reserve currency because it is the largest and most liquid government bond market. Our T-bill market alone is (ex-Japan) bigger by a factor of two-to-one than the next five government debt markets. China may not like owning so much US paper, but the market for US treasuries is three times the size of the Euro zone debt market, and China has no other choice.
Despite all the doomsayers, I am of the opinion that the worst of the economic crisis in the U.S. has passed. That is not to say that unemployment won’t continue to worsen for the next six months, but the notion that we are headed into a second great depression is way oversold. If you want to see what a depression looks like, check out these charts from yesterday’s Wall Street Journal.
So President Obama’s task for the next few days will be that of the Zen Master. Let Merkel, Sarkozy and Hu posture for their domestic audiences, do some serious listening and avoid the temptation to instruct them how to fix their own domestic economies.
Categories: Barack Obama · Economics · Recession
Tagged: Barack Obama, G-20 Summit, Hu Jintao, Nicholas Sarkozy
Paul Krugman is in despair. Why should I care? When some of us were writing about the coming recession 14 months ago, Krugman was oblivious, saying “it’s unlikely that America will experience a recession as severe as that in, say, Argentina.”As Barack Obama’s campaign gained strength a year ago, Krugman insisted that it was pipe dream and that Hillary Clinton was the only candidate that could beat the Republicans.
Now Krugman insists the only route for the Obama administration is to nationalize the banks. Krugman insists the public/private partnership announced yesterday by Tim Geithner is fatally flawed.
But the Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt.
So maybe he should explain why Larry Fink of Blackrock and Bill Gross of PIMCO both are willing to put hundreds of millions of their own dollars at risk alongside the government to buy these assets? As Gross explained it, he puts up $50 Million, the Treasury puts up $50 Million and the Fed loans the partnership $300 Million. Krugman assumes Gross is going to put $50 million at risk just because the $300 million is non-recourse debt?
The problem with Krugman’s whole nationalization scheme is that it creates a self-fulfilling prophecy for the Bear Raiders who have been shorting bank stocks. Assume we nationalize Citibank. The bears turn to another prey, Bank Of America. If they drive it’s stock low enough, it too will get nationalized. The big question will always be “who’s next?” The non-nationalized banks will be like wounded antelopes confronting a pack of wolves. Where will it end?
The whole Washington/New York axis of Cassandras might want to reconsider their “end of the world” rhetoric. I’d hate for Paul Krugman to look foolish three times in 12 months.
Categories: Barack Obama · Business · Recession · Wall Street
Tagged: Bank nationalization, Barack Obama, Paul Krugman
The Great Recession is giving us a lesson in just how “discretionary” most spending is. Auto sales fell off a cliff in the last three months. It was obviously easy for most people to postpone the purchase of a car, despite massive sales incentives. But surprisingly the same is true for many medical procedures.
Forty-four percent of hospitals have seen declines in surgeries, with hip procedures showing the steepest drop-off at 45%, according to another new survey. As a result, 47% of the hospitals surveyed expect to make staff cuts, and 69% plan to cancel or delay equipment purchases, according to the survey by Novation, a company that manages supplier contracts for hospitals.
One of the things the Obama Administration has to be careful of in both the Auto bailout and the Health Care investments is to not pour money into industries that are suffering from massive overcapacity. The nation’s savings rate has rocketed to 5% from zero in four months. Assuming we will go back to our old profligate habits of buying a new car every three years or getting plastic surgery on a whim is probably a bad bet.
Categories: Business · Economics · Politics · Recession
Tagged: Auto company bailout, Barack Obama, Chrysler, Credit Crisis, GM, Hospitals, Plastic Surgery, Recession
The new poll from the New York Times/CBS News proves that for all the right wing fulminating about the Recovery Act, the public is solidly behind the President. Limbaugh and Hannity may have a megaphone, but it is directed at a very small (18%) minority that almost doesn’t pass the “who cares test”. What is more, the public sees what’s going on with Lindsay Graham and Eric Cantor.
Most Americans said the president was trying to make good on his promise to bridge the partisan divide. About three-quarters, including 6 in 10 Republicans, said Mr. Obama had been trying to work with Republicans. But only 3 in 10 Americans said Republicans were doing the same. On the economic stimulus plan, 63 percent of poll respondents said Republicans opposed the legislation for political reasons, not policy ones. Seventy-nine percent said Republicans should now be working in a bipartisan manner rather than holding fast with their policies.
But 56 percent of those surveyed said Mr. Obama’s priority should be following the policies he proposed during the campaign last year, rather than working with Republicans.
The strange thing about the Washington Echo-chamber is that dickheads like Cantor think they are really winning, when to the public at large, they are total losers.
Categories: Barack Obama · Politics · Recession
Tagged: Barack Obama, Eric Cantor, Lindsay Graham, New York Times / CBS Poll, Politics, polling, Recession, Republican Party, Rush Limbaugh
There is a phrase on Wall Street–”talking your book”–which essentially means you are spreading information that would help the positions you have in the market. The most obvious example is shorting a stock and then saying the company is heading to bankruptcy. A lot of people are talking now about a new great depression or are saying that the Recovery Act is just a waste of Tax payer money. A lot of them are “talking their book”. Take George Soros and Newt Gingrich for example. Here’s Soros.
Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.
Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.
I will guarantee you that Soros’ Hedge Fund is positioned to benefit from the fall of banking stocks and has made millions on the short side in the last three weeks. And how about Newt Gingrich?
“You are loyal to the nation,” he said, “not the temporary possessor of power. I think any president deserves the opportunity to make a proposal, and that proposal should be listened to seriously. But it is foolish for a president to assert that they have prime ministerial authority.”Besides, there are political gains to be made by standing tough. Mr. Gingrich sees the stimulus bill as his party’s ticket to a revival in 2010, as Republicans decry what they see as pork-barrel spending for projects like marsh-mouse preservation. “You can imagine the fun people will have with that,” he said.
When Gingrich says the Obama recovery policies will fail, he is “talking his book” for the 2010 election. (more…)
Categories: Business · Credit Crisis · Recession
Tagged: Banking crisis, Barack Obama, Credit Crisis, George Soros, Newt Gingrich, Politics, Recession, Rush Limbaugh, Stock Market Panic
Nothing of him that doth fade,
But doth suffer a sea-change,
into something rich and strange
-William Shakespeare, The Tempest
The essence of my obsession with the concept of The Interregnum is that we are entering a period in which all conventional wisdom is useless–uncharted waters. We would be foolish not to realize the extraordinary import of the passage of the Recovery Act.
As you look at the list of where the money is going, it should dawn on you that in one month President Obama has secured twice the investment in the things progressives care about than Bill Clinton did in eight years.
The Republicans understand this Sea-change and that’s why they have gone into 24/7 opposition. But the base that supports that obstruction is shrinking and I can imagine some possible gains for the Democrats in both House and Senate in two years (again counter the the conventional wisdom). (more…)
Categories: Barack Obama · Credit Crisis · Recession
Tagged: 2010 Election, Barack Obama, Bill Clinton, Interregnum, Milton Friedman, Recession, Recovery Act, Ronald Reagan, sea change
Has Barack Obama’s ascension to the Presidency changed the nature of what’s cool in hip hop?
Gold teeth, luxury cars and diamond chains heavy enough to slump a bodybuilder’s shoulders have been ubiquitous symbols in hip-hop music for years, if not decades.But — as you may have noticed at the Grammys on Sunday — there are signs that the genre’s high-dollar bling may not survive the economic recession.
Many rappers came to the annual music awards show wearing sleek suits; their famous jewels were conspicuously absent. Artist Lil Wayne, who accepted two of rap’s biggest awards — Grammys for best solo rap performance and best rap album — performed wearing a T-shirt.
I have sensed a rising social consciousness in hip hop over the last year. Showing off the bling is no longer hip. Funny how styles change when times get hard.
Categories: Entertainment · Music · Recession
Tagged: Bling, Grammys, Hip Hop, Lil Wayne, Music
Everyone is saying the problem (the Wall Street sell-off) with the Geithner announcement was that it wasn’t specific enough.
Bullshit!
What freaked out Wall Street was Geithner’s “stress test”. Unlike Paulson, Geithner is unwilling to give a bank money until he knows exactly what the stress tested balance sheet looks like. Unlike Ken Lewis of B of A, he’s not going to buy a pig in a poke. There are so many worthless securities in these banks that they aren’t confessing.
What Wall Street is waking up to is the fact that a lot of bank stockholders are going to get wiped out, because, if the stress test is good, a lot of banks are currently insolvent.
What Barack and Tim need to do now is to get Warren Buffett and Peter Lewis to say their firms will work with the Aggregator JV to buy paper from banks that will survive in return for some equity stake.
Categories: Barack Obama · Credit Crisis · Politics · Recession
Tagged: Aggregator Bank, Banking crisis, Barack Obama, Credit Crisis, Interregnum, Recession, Stock Market Panic, Tim Geithner
