Archive for the ‘Uncategorized’ Category

« Older Entries

Alan Greenspan “Takes On His Critics”

Friday, February 26th, 2010

The March 1 edition of Fortune Magazine has an article titled “Alan Greenspan Fights Back.”  The link is found here.

I found the article interesting for a variety of reasons. As the article mentions, rarely has Greenspan addressed his purported culpability in creating the housing bubble and its accompanying impact on the economy.

Greenspan’s tenure at The Federal Reserve is most fascinating.  One aspect of this is how his performance was perceived over time.  Throughout most of his tenure he was effusively lauded (i.e. “The Maestro”) – but this widespread acclaim has been (severely) tarnished over the last decade.

As the Fortune article says, “Four years after leaving the Fed as the Greatest Central Banker Ever, the longest-serving chairman, the Maestro, Alan Greenspan is the designated goat.”

As the article indicates, Greenspan is preparing a 12,000-word article in his defense.  I look forward to seeing this article and analyzing his argument.

As far as Greenspan’s performance and actions are concerned, I do not believe there has been an accurate assessment yet provided.

back to <home>

SPX at 1102.41 as this post is written

  • Share/Bookmark

Tags:
Posted in Uncategorized | No Comments »

Tax Increases And Our Economic Situation – Follow Up

Tuesday, February 23rd, 2010

On October 16 I wrote a post titled “Tax Increases And Our Economic Situation.”  That post can be found at this link.

Some may wonder what tax increases I am referring to, as at least headline tax rates have yet to increase in many areas.  Tax increases have been deferred for many reasons.  Among these reasons is the negative political ramifications of raising taxes before the upcoming November elections.

However, if we are to at least partially curtail our current deficit levels, an increase in taxes is likely certain.  Everyone should know this, at least intuitively; and I believe there is widespread recognition of these impending tax increases.

Thus, our current economic situation is such:  economic weakness that is met with stimulus / deficit spending – that then leads to tax increases.  These tax increases – during a time of economic weakness – will likely weigh (very) heavily against any lasting economic recovery.

This situation may not be inherently problematical if the stimulus / deficit spending was indeed highly economically stimulative.  However, if it is not (and there is little if any evidence that recent stimulus programs have been), a “vicious circle” may form – with large stimulus / deficit spending driving ever-higher taxes – with the net result a weaker – and more highly-indebted economy.  This weaker economy in turn drives higher stimulus / deficit spending – and ever-higher taxes.

There are a lot of complexities and other factors at work in this relationship; however, such an in-depth discussion would be too prohibitively lengthy and complex for a blog post.

However, as one can envision, this “vicious circle” can become very pernicious on many fronts.

back to <home>

SPX at 1107.93 as this post is written

  • Share/Bookmark

Tags: ,
Posted in Intervention, Uncategorized | Comments Off

A Notable Poll On Economic Conditions

Monday, February 22nd, 2010

Here is poll (in PDF format) on economic conditions that I believe is highly notable.  It is from CNN and was conducted February 12-15, 2010.

The question presented was “How would you rate the economic conditions in the country today — as very good, somewhat good, somewhat poor, or very poor?”

A total of 83% replied economic conditions were “somewhat poor” or “very poor.”  44% of respondents said conditions were “very poor.”

Of further note, when one looks at the trend of the responses, there hasn’t been much of an improvement from year-ago levels.

Although this is only one survey, I think it is notable in that it seems to belie many other economic statistics that have been used to support the widely-held theory that we are in an economic recovery.

This survey seems to support other statistics that indicate that many people believe current economic conditions to be poor – if not very much so.  However, at the same time, some economic conditions surveys (and various economic indicators) show expectations for a strong economy in the future.  One example of this was noted in my January 4 post, which is found here:

http://www.economicgreenfield.com/2010/01/04/consumer-confidence-disparities/

In my opinion, this large dichotomy can not, and will not, last.

back to <home>

SPX at 1108 as this post is written

  • Share/Bookmark

Tags:
Posted in Uncategorized | Comments Off

The Quality Of Deficit Spending

Friday, February 19th, 2010

In the Wall Street Journal on Saturday, February 13 there was an editorial titled “High-Speed Spending.”  This discussed the dubious financial dynamics of a long-proposed “high speed” Orlando-to-Tampa rail project.

I also heard of a proposal to do a similar project between St. Louis and Chicago.

I have lived in the Chicago area for most of my life and have never heard anyone expressing a desire to have faster transportation (or such a “high speed” rail option) between St. Louis and Chicago.  Yet, in this case, as in the Orlando-to-Tampa case, the proposed “high-speed” rail project would cost billions of dollars.

If we are looking to spend money on infrastructure, perhaps it would be wiser to spend on our existing infrastructure, which is literally crumbling.  Estimates to fix our existing infrastructure range into the trillions of dollars.  These estimated figures are rapidly growing.

Examples of wasteful deficit spending are innumerable, unfortunately.  In my opinion, we, as a nation, are not in a position to waste any money at this point.

back to <home>

SPX at 1102.12 as this post is written

  • Share/Bookmark

Tags: ,
Posted in Intervention, Uncategorized | 1 Comment »

Editorial Of Note: “Greece’s Crisis: A Warning To Profligate U.S.?”

Thursday, February 18th, 2010

On February 10th an editorial by Scott S. Powell appeared in Investor’s Business Daily titled “Greece’s Crisis: A Warning To Profligate U.S.?”  The link can be found here.

I am highlighting this editorial as it discusses many important issues, most of which I have previously mentioned on this blog.  As well, it compares our current financial situation to that of Greece’s.

back to <home>

SPX at 1099.51 as this post is written

  • Share/Bookmark

Tags: , ,
Posted in Uncategorized | Comments Off

Debt And Taxation

Tuesday, February 16th, 2010

On Saturday The Wall Street Journal had an editorial titled “Escape from Taxation.”  The link is here.

In the editorial, it is mentioned that higher-income people are moving out of New Jersey as the tax rate is increased.

In my article “America’s Trojan Horse” found at this link, I discussed the widely-held fallacy that debt and deficits are almost inconsequential because governments can always increase taxation to service and repay debt.

What is happening in New Jersey is an important example of how this “increasing debt / increasing taxation” dynamic plays out in the “real world” – especially during times of prolonged economic stress and high indebtedness.

The implications are very far-reaching with regard to the resolve of heightened levels of indebtedness.

back to <home>

SPX at 1083.50 as this post is written

  • Share/Bookmark

Tags: , ,
Posted in Uncategorized | Comments Off

Societal Implications

Sunday, February 14th, 2010

One aspect of our current period of economic weakness that lacks broad recognition is the impact on society.

There are many different aspects of this societal impact, some of which I have already discussed on this blog.

Yesterday’s Wall Street Journal, page A3 had stories that serve as examples of this societal impact of economic weakness.  One story was titled “Police, Fire Departments Face Budget Axe.”  Another was “Fiscal Woes Push Up (School) Class Size.”

While it is difficult to quantify these societal impacts, they are nonetheless important.

back to <home>

SPX at 1075.51 as this post is written

  • Share/Bookmark

Posted in Uncategorized, You | Comments Off

Treasury Secretary Geithner’s Comments

Thursday, February 11th, 2010

Treasury Secretary Timothy Geithner was on “This Week” on Sunday and made various comments.  Here is the link:

http://abcnews.go.com/ThisWeek/week-transcript-treasury-secretary-timothy-geithner/story?id=9758951

I could make a lot of comments regarding this interview.

However, I would like to focus on this one exchange:

TAPPER: The Congress just voted to raise the debt ceiling to more than $14 trillion dollars. Moody’s, the bond rater, just said, quote, “unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture for the next decade will at some point put pressure on the triple-A government bond rating.

Is the United States going to lose its triple-A government bond rating? And what happens when the credit markets are no longer willing to buy U.S. debt?

GEITHNER: Absolutely not. And that will never happen to this country. And again, if you step back and look at what has happened throughout this crisis, when people were most worried about the stability of the world, they still found safety in Treasuries and the dollar. You’re still seeing that every time. People are reminded again about the many challenges you see around the world.

_____

my comments:

First, I don’t think any country can ever flatly deny the possibility of a credit downgrade.  As well, as I have previously commented, sovereign deficit and debt levels are coming under increased scrutiny.

Second, as far as the U.S. Dollar and Treasuries purportedly acting as “safe havens” during the crisis, and the inferences Geithner draws from this :

Although the U.S. Dollar and Treasuries increased in price during the height of the financial tumult, I don’t agree with the idea that this price increase can be viewed as an (implied) affirmation of our financial standing.  Many different factors played into the price increases of the U.S. Dollar and U.S. Treasuries during that period.  As such, I do not come to the same conclusion as does Treasury Secretary Geithner.

As well, I don’t believe that drawing inferences off of past price action is necessarily a strong predictor of the future, especially on an “all things considered” basis going forward.

back to <home>

SPX at 1062.90 as this post is written

  • Share/Bookmark

Tags: , , ,
Posted in Uncategorized | Comments Off

Two Measures Of Economic Activity

Tuesday, February 9th, 2010

Two measures of economic activity that I closely follow have been weak over the recent past months.  This is notable, as they did enjoy a significant “boost” over the mid-2009 timeframe.

These two measures have proven to be excellent indicators in the past.  They would be considered “coincident” in nature.

I view the weakness of these two economic measures to be disconcerting.

Of course, the weakness they portray is in contrast to a variety of widely quoted economic statistics and other economic indicators that have been showing various degrees of economic recovery and strength.

back to <home>

SPX at 1070.77 as this post is written

  • Share/Bookmark

Tags:
Posted in Uncategorized | Comments Off

Historical Perspective – Employment And Output

Monday, February 8th, 2010

Here are two charts from the Minneapolis Fed site:

http://www.minneapolisfed.org/publications_papers/studies/recession_perspective/index.cfm

They show, from a historical context, how declines in employment and output during this period of economic weakness (which FRB Minneapolis refers to as a recession) compare to those of previous recessions.

First, the employment chart.  Here are two notes regarding this chart:

1. Employment is nonfarm payroll employment calculated by the Bureau of Labor Statistics.
2. Postwar recessions include the 10 recessions as defined by the NBER that started between 1946 and 2006.

Second, the output chart.  A couple of notes regarding this chart:

1. Output is gross domestic product adjusted for inflation as calculated by the Bureau of Economic Analysis.
2. Postwar recessions include the 10 recessions as defined by the NBER that started between 1946 and 2006.

There are other pertinent notes on the FRB Minneapolis page, as seen below:

Background on Recession/Recovery in Perspective

This page places the current economic downturn and recovery into historical (post-WWII) perspective. It compares output and employment changes from the 2007-2009 recession and subsequent recovery with the same data for the 10 previous recessions and recoveries that have occurred since 1946.

This page provides a current assessment of ‘how bad’ the 2007-2009 recession was relative to past recessions, and of how quickly the economy is recovering relative to past recoveries. It will continue to be updated as new data are released. This page does not provide forecasts, and the information should not be interpreted as such.

The charts provide information about the length and depth of recessions, and the robustness of recoveries.

Post-WWII Recessions

The Business Cycle Dating Committee of the National Bureau of Economic Research determines the beginning and ending dates of U.S. recessions. http://www.nber.org/cycles.html
It has determined that the U.S. economy experienced 10 recessions from 1946 through 2006. The committee determined that the 2007-2009 recession began in December 2007. The ending date has not yet been determined. Ending dates are typically announced several months after the recession officially ends.
http://www.nber.org/cycles/dec2008.html

Length of Recessions

The 10 previous postwar recessions ranged in length from 6 months to 16 months, averaging about 10 1/2 months. The 2007-09 recession was almost certainly the longest recession in the postwar period. But the total length of the recession will only be known when the Business Cycle Dating Committee retrospectively determines the final month of the recession.

Depth of Recessions

The severity of a recession is determined in part by its length; perhaps even more important is the magnitude of the decline in economic activity. That is, how much do employment and output fall?

back to <home>

SPX at 1059.97 as this post is written

  • Share/Bookmark

Tags: ,
Posted in Uncategorized, Unemployment | Comments Off

« Older Entries