Econ: The Forecast is...?

[Zkribbler]

... Obama is spending money the U.S. government doesn't have on his pet projects, just like Bush. ...

While Bush was squandering the money he got from running deficits, Obama is investing...in things like infrastructure, education, alternative energy.

And while, right now, the bail-outs show up as debt, most if not all the bail out money is going to loans and equity positions. True, some of the companies who are getting the money will go belly up [I'm looking at you, Chrysler], most will return more money than we gave them.

And don't forget, in just one month in office, Obama has already discovered programs which were scheduled to waste $2 trillion over the next 10 years.

[DanS]

I give NGR permission to escalate this discussion.

[Naked Gents Rut]

While Bush was squandering the money he got from running deficits, Obama is investing...in things like infrastructure, education, alternative energy.

You're just a bad as the Republicans who thought paying for the Iraq War with deficit spending was just dandy because it agreed with their ideological biases.

And while, right now, the bail-outs show up as debt, most if not all the bail out money is going to loans and equity positions. True, some of the companies who are getting the money will go belly up [I'm looking at you, Chrysler], most will return more money than we gave them.

And don't forget, in just one month in office, Obama has already discovered programs which were scheduled to waste $2 trillion over the next 10 years.

You're also extremely gullible.

[Zkribbler]

You're also extremely gullible.

Yep. I believe there's a way out of this mess.
Repubs are the "can't do" party, the nattering nabobs of negativism.

[Naked Gents Rut]

As a side note, doesn't Obama's proposed budget confirm my pre-election belief that he would govern as a European-style social-democrat?

[Zkribbler]

As a side note, doesn't Obama's proposed budget confirm my pre-election belief that he would govern as a European-style social-democrat?

Depends on your definition. If you mean someone who believes in civil rights, egalitarianism, and regulation of industries, you were right.

[notyoueither]

I give NGR permission to escalate this discussion.

Will there be missiles?

[Zkribbler]

Will there be missiles?

[Jon Miller]

It is OK to go in debt due to stimulus.

I never said it wasn't. I quite clearly said that what's not ok is piling on trillions of dollars in additional debt to finance non-stimulative spending, which is exactly what Bush did and Obama is now doing.

Obama would be raising taxes. He isn't due to wanting stimulus. As such, not raising taxes = stimulus. Obama is going into debt as part of stimulus.

Both Bush and Obama are doing stimulus, the problem with Bush is he did it when it was unnecessary...

JM

[Naked Gents Rut]

As such, not raising taxes = stimulus.

No.

[notyoueither]

More rumblings about Eastern Europe, and the EU in general.

http://www.ft.com/cms/s/0/324022d0-0696-11de-ab0f-000077b07658.html?nclick_check=1

Global policy shortcomings will cost us dear
By Wolfgang Münchau

Published: March 1 2009 19:30 | Last updated: March 1 2009 19:30

Virtually every policy response to the crisis, on both sides of the Atlantic, seems to be falling short. My colleague, Martin Wolf, and the editorial column of the Financial Times have argued that the Obama administration’s financial sector rescue plan is dangerously inadequate. I would like to make the additional observation that the tendency to disappoint applies to almost every single policy decision by almost every government.

Let us briefly take stock of some of the policy decisions and proposals in the European Union. Faced with an economic contraction of at least 3 per cent this year, according to my estimate, the EU has agreed an effective stimulus of some 0.85 per cent of gross domestic product for the current year, as calculated by David Saha and Jakob von Weizsäcker, two economists at Bruegel, a Brussels-based think-tank. The stimulus was also not well co-ordinated, which limits its economic impact.

EU governments reacted to the acute phase of the crisis with mostly voluntary state recapitalisation schemes and debt guarantees. But there is not a single country where the schemes seem to be solving the problem of insufficiently capitalised banks, able and willing to lend to businesses and consumers.

Last week’s much awaited report about the future of European banking regulation and supervision was another example of a policy proposal failing to meet even the lowest expectations. The committee, headed by Jacques de Larosière, a former governor of the Bank of France and managing director of the International Monetary Fund, could not agree on the need for a single supervisor for Europe’s 45 cross-border banks. Instead, it recommended leaving national regulators in charge and creating two new institutions – one at the macro level and one at the micro level – with the job of mediating between national governments and regulators. When asked why he did not opt for an EU-wide supervisor, Mr de Larosière responded: “We might have been accused of being unrealistic.” I got the sense – but maybe this is a misperception – that he wanted to push harder for more centralisation, but that there was no consensus.

Another fitting example of policy complacency is the response to the central and east European (CEE) currency crisis. This was on the agenda of Sunday’s informal European summit, which concluded after this column was written. The proposals that were discussed ahead of the summit included a stabilisation fund. This is desirable and necessary, no doubt, but it is not at all clear how this is sufficient to ward off a speculative attack against all peripheral CEE currencies. I argued last week that euro-isation is the way to go.

Where tragedy turns into farce is the string of policy proposals by Angela Merkel, German chancellor. At one time, she advocated a United Nations Economic Council as a co-ordinating body for global finance – an economic equivalent to the UN Security Council. At the recent Group of Four European summit, she pushed ahead with a proposal to regulate hedge funds and tax havens. Most recently she said that countries should co-ordinate the timing of their bond issues. All this would imply that the crisis was caused by hedge funds, by policy failures due to a lack of international organisations, and by the fact that the Americans and Europeans issue their bonds on the same day of the week. I shudder to think what she might propose next.

Why this extraordinary complacency? One reason is that policymakers are not sufficiently alarmed about the immediate economic catastrophe. To them, this is still what US economists call a “garden-variety recession”. They must have been told that global trade has been in freefall for four months now, contracting at a faster rate than during the Great Depression. Yet they still appear to believe that the economy will miraculously recover in the second or third quarter, which is when their stimulus packages will kick in. But these plans are nowhere near big or good enough to stop such a massive decline so quickly.

As for Ms Merkel and her colleagues from France, Spain and Italy, they seem to be overwhelmed by what is clearly the wrong type of crisis for them.

That cannot be said of Mr de Larosière. For all my criticisms of his committee’s recommendations, his analysis of the global financial crisis is spot on. His team was afraid to make proposals that, in his estimate, had no chance of being adopted. I have no illusions about the enthusiasm among governments for a single EU banking supervisor. But if nobody puts up a fight, we should not be surprised that the only policy actions we get are the ones we get.

This is no longer a banking crisis. It is a policy crisis of the first order. Speculators, once more, are getting ready to deconstruct a European edifice, as they did in 1992, but this time it will be one on a bigger scale.

munchau@eurointelligence.com

Copyright The Financial Times Limited 2009

I'd like to hear more from our Euros, especially about that last bit.

[Naked Gents Rut]

We Are So ****ed, Vol. XXVI

In the end, Obama believes, forward motion on his agenda matters more than any details.

“Even if we’re busting the budget, we’ve got to solve some of these problems,” said a member of his inner circle. “I’d rather live with a debt than have people go without health care.”

http://www.politico.com/news/stories/0309/19464_Page2.html

It's going to be a long eight years...

[notyoueither]

How ****ed do you think?

[Agathon]

As a side note, doesn't Obama's proposed budget confirm my pre-election belief that he would govern as a European-style social-democrat?

Why is that a bad thing? Your country, up until now, has been run by complete idiots. Why not run a country the way that has proven to be most efficient?

You're the daftest people in the world, with the possible exception of the Poms. I guess those are the only two countries where "Tory" doesn't equal "venal ******" in the public mind.

[DanS]

It is often said that European banks are more leveraged than American banks, even while being knee-deep in dodgy US mortgage securities -- which continue to decline, by the way. However, I have not seen the relevant comparable numbers to this effect. Just anecdotal stuff.

If it is true, then the European banks are well and truly screwed given that over half of our biggest banks are understood by all to be unsound.

It strikes me as likely that this crisis is hitting different European countries different ways. Maybe that's why it is difficult to craft a consensus policy. F.e., Germany's banking crisis may not be acute and its real estate market already burst a decade ago, but it is overly reliant on exports that are plummeting. The UK is experiencing a banking crisis and a real estate bubble hangover, but is not very reliant on exports. Austria needs somebody to bail them out on their Eastern European investments. Eastern European countries need currency protection. And so on.