Obama stimulus

[Pekka]

Sounds kinky, eh?

Anyways, explain this to me. First of all, I'm not economy smart. I don't even know how it all works.

However, it seems to my non-educated butt, that the 800 billion package is a bad idea. Why? Because where is that money coming from? US is a debt nation, it doesn't sound like there's all this free money, what this does is more debt. Sure, it is invested in jobs, however, this is intervening in the free and job market. It's simply not that clear cut, who knows what the real results will be? It won't be just these jobs created, it's also jobs NOT created, it's also government intervening with a huge hand, that's a bigger government. You guys are basically nationalizing these big entities to save their butts, while borrowing money to do it.

It's just a bad idea with my logic, even though it is not this simple. How are you going to ever recover by going more broke? This means the prices will go up due to inflation, and this in turn will give a pressure for politicians to start price fixing, which is even more intervention. This is starting to sound more socialist than socialist countries themselves ever went through, why are you doing this?

Why don't we take the recession or depression or what ever is coming to us, head on, deal with it, instead of spending more money to increase the government and basically all the problems that comes with it?

You're buying stuff you can't produce anymore, but the dollar is at stake, so when these countries won't want the dollar anymore, or worse, they're also your creditors, it's simply fubared.

What am I not getting?

[Chemical Ollie]

We? Did you move already?

[SlowwHand]

Porn mags want bail outs now.

http://www.google.com/search?client=opera&rls=en&q=Porn+mags+want+bail+outs&sourceid=opera&ie=utf-8&oe=utf-8

[DanS]

why are you doing this?

Fear.

[Pekka]

Yes... well who knows. I don't know about these things, that's for sure. Just seems to me a crash of some sort is inevitable, the sooner it's done with, the sooner we can all continue to prosper. The later this goes on, the harder it will get. But I might be wrong, I hope I'm wrong. Maybe the US will get back on track, selling stuff again, saving some. Maybe these things will work out, hopefully they do.

Sloww, now THAT is a sign of bad times

Chemical Ollie, not yet. I sometimes say we when I like the context I can choose like that. That's why I'm a Finn after a good hockey game, but rarely otherwise.

[Kidlicious]

Sounds kinky, eh?

Anyways, explain this to me. First of all, I'm not economy smart. I don't even know how it all works.

However, it seems to my non-educated butt, that the 800 billion package is a bad idea. Why? Because where is that money coming from? US is a debt nation, it doesn't sound like there's all this free money, what this does is more debt.

Since no one is borrowing money right now there is extra money to be borrowed. But they don't really know how much extra money there is out there to be borrowed before it starts to take what would be borrowed from the private sector. If it's too much then they will actually hurt a recovery and cause interest rates to go up. That will cause the fed to raise interest rates too to hold down inflationary pressure. If it's too little then it's kind of a waste because it's not going to stimulate the economy, but then there's the problem of all that money in the economy that will eventually be inflationary should the economy start to pick up. If that's the case then what will the fed do? 1) They can raise interest rates to prevent inflation, but that's going to really slow down a recovery since there is so much money out there, and banks are supposidely going to pay back all this money (trillions) that they owe. So how are we not going to have another credit crunch if this happens? 2) They can let another bubble happen in some asset market. This bubble would be huge and develope very quickly. But then you would think that investors would be more sofisticated at this point in time, so the bubble won't last very long. Markets will be very volitile.

Sure, it is invested in jobs, however, this is intervening in the free and job market. It's simply not that clear cut, who knows what the real results will be? It won't be just these jobs created, it's also jobs NOT created, it's also government intervening with a huge hand, that's a bigger government. You guys are basically nationalizing these big entities to save their butts, while borrowing money to do it.

It's just a bad idea with my logic, even though it is not this simple. How are you going to ever recover by going more broke? This means the prices will go up due to inflation, and this in turn will give a pressure for politicians to start price fixing, which is even more intervention. This is starting to sound more socialist than socialist countries themselves ever went through, why are you doing this?

Well price fixing isn't that bad of an idea if you control the supply as well. Some sort of control over housing prices seems in order. Otherwise prices aren't going to stablize. Either way you look at it prices are not going to be stable otherwise.

Why don't we take the recession or depression or what ever is coming to us, head on, deal with it, instead of spending more money to increase the government and basically all the problems that comes with it?

Capitalism only works when profits are growing. When I say profits I mean tax breaks and anything else that will make rich people richer. When rich people stop getting richer they aren't going to wait for a failing economic system to recover the're going to change the system to one that will work. That system is fascism.

The current economic system is based on credit, tax breaks and bailouts. This is a system that has replaced an older capitalist system that was less reliant on those things. That system failed, because it was not making the rich richer any longer. We won't ever go back to that system, because the rich don't believe that it will work any longer, and it won't.

[Kidlicious]

http://www.msnbc.msn.com/id/28546578/

Fed faces tough task ending emergency support

updated 4:39 p.m. CT, Wed., Jan. 7, 2009
NEW YORK - By Kristina Cooke

When U.S. central bankers eventually move to wean markets off the emergency support put in place to rescue the economy, they will face the difficult and delicate task of timing it right.

If they wait too long, they risk sky-high inflation or another asset bubble. If they move too fast, they risk undermining any incipient economic recovery.

Even against the current backdrop of a miserable economic outlook and the specter of deflation, a growing number of voices are warning that the Federal Reserve needs a clear and credible exit strategy for its unprecedented policies.

The Fed's balance sheet has more than doubled in size to over $1.2 trillion in recent months as policy-makers sought to shield the economy from the worst financial crisis since the Great Depression by pumping liquidity into key credit markets.

"All roads lead to inflation and the economy will be very precariously perched when the Fed starts reversing its policy," said Michael Pento, senior strategist at Delta Global Advisors. "It's sophomoric and naive to think there is any way out of this without a lot of pain."

While the Fed has not gone into detail on how it might go about withdrawing its extraordinary support for credit markets and the economy, the subject is clearly on the minds of policy-makers.

At a recent symposium at Columbia Business School, New York Federal Reserve Bank staffer Til Schuermann asked a panel of academics: "How should we, the Fed, think about an exit strategy?"

The answer from Tano Santos, a professor of finance at Columbia: Timing will be crucial.

U.S. Securities and Exchange Commission Chairman Christopher Cox last month urged policy-makers to answer tough questions about exit strategies now and not "stumble along a dangerous path of confusion," while Glenn Hubbard, dean of Columbia Business School, counts unwinding the liquidity programs among the top challenges facing policy-makers.

SELF-LIQUIDATING

Many of the Fed's emergency facilities have been built with the intention they self-liquidate, said Stuart Hoffman, PNC Financial's chief economist. In other words, when the economy and credit markets improve, it won't make sense for firms to tap the facilities when they can borrow cheaply elsewhere.

"It could be easy, but it's all conditional on getting back to a strong economy and bank balance sheets that are trustworthy again," said Michael Feroli, U.S. economist with JPMorgan in New York.

Demand from banks for short-term funding under a Fed facility set up in December 2007 has already begun to wane. Analysts say the narrowing in the Term Auction Facility's bid-to-cover ratio suggests banks have less need for the program and are meeting their funding needs elsewhere.

But emergency lifelines that target companies and consumer borrowing could be more of a headache, said PNC's Hoffman, and there could be false signals and starts.

Loans under a program to help market participants meet credit needs of households and small businesses, the Term Asset-Backed Securities Loan Facility, for example, have a three-year maturity, which could complicate the wind-down.

A commercial paper facility, which addresses non-financial companies' short-term funding needs, may also need to be actively wound down by reducing volume and raising borrowing costs to force companies to tap the market instead, Hoffman said.

Different sectors recover at different times when the economy picks up and if only a handful of firms tap a facility, it would be hard to argue the programs are still needed.

Policy-makers may also have to contend with political pressure not to quash a burgeoning economic recovery by unwinding their emergency support, especially for programs aimed at consumers.

When the Bank of Japan ended its quantitative easing regime in 2006, politicians wanted it to remain in place longer. Japan's economy remains in a slump.

Perhaps, as Columbia Business School's Hubbard told the symposium on the financial crisis he hosted last month, the Fed should bear in mind that "riding a flying dragon is easy, landing is difficult."