“We are, and will remain, a bank” - Vikram Pandit, Citigroup CEO. (h/t King Felix)
Holy contango, Batman! Sorry, that doesn’t make sense, but I just can’t get the word ‘contango’ out of my head. In any case, way to aim for the stars, Vikram!
Republican Senators Hatch and Graham - not a duo likely to bolt across the aisle any time soon - have downplayed the Treasury Secretary nominee’s history with (supposedly accidental) non-payment of taxes. Hatch says that none of us are perfect, while Graham pleads that this is not the time for partisan interference with appointments to top economic jobs. So, nothing to see here, right?
That is the conventional wisdom at this point, but Michelle Malkin laughs at convention (and isn’t so wild about wisdom, either):
Time for the Geithner withdrawal betting pool. My guess? Friday 6:45pm Eastern.
I’m going to go with March 2011. This seems like one of those scandals that will be slow to develop…
Obama, speaking very reasonably about concerns that his stimulus package isn’t big enough:
If Krugman thinks $800 billion isn’t going to get our economy going, it makes sense for him to say so. But we’re at far too early a stage to justify his histrionics about it. The real debate over the bill hasn’t even started yet, and we have very little idea what other bills are going to be introduced in the early days of the new administration that will also spend money in a relevant way. There simply isn’t anything to get worked up about yet.
Meanwhile, I’m with Felix Salmon on the meaninglessness of Obama’s goal to “create or save” 3 million jobs. It might be sound politically though, as a reassuring sound-byte that can’t come back to haunt him. Unlike a net increase in jobs, a “saved job” isn’t the sort of thing you can measure. I could buy a six-pack at the corner store and claim I’d saved 3 million jobs. I’d be lying, but as long as there were still more than 3 million people in the country working, it’s not clear how you could prove me wrong.
Pat Ruffini is a pretty awful person, as has been mentioned in this space before. But he is what he is, and proud of it. When thinking about the GOP’s best political response to the financial crisis, he doesn’t even pretend to actually care about the economy itself:
The GOP’s number one priority politically is to set into motion a series of events that will make Obama look more ineffective, partisan, and unpopular than he is today. Playing hard-to-get on the stimulus is one way to do it. And we need to set the stage for a unified and effective Republican opposition that will actually fight from top to bottom.
Go on with your bad self, Patrick.
(h/t Sullivan)
Here, from the WSJ, is far and away the most reproduced chart of the week, if not the year:
Overall, that’s obviously bad news. So obviously, in fact, that I have nothing to say about it. The breakdown, though, is interesting. On the one hand, I suspect that the greater drop in luxury purchasing means that the overall numbers aren’t as bad as they seem. My understanding of Keynesian economics is fairly primative, but it does seem to be widely agreed that, despite our focus on overall spending levels, not all spending is created equal in its ability to provide stimulus. Crudely put, spending $100 on a physical object made with $85 worth of materials which were in turn the product of $75 worth of mining labor is terrific spending, stimulus-wise, while spending $100 on a painting produced with $3.50 worth of art supplies is not. This isn’t to say that the latter sort of spending isn’t useful at all; for one thing, it makes it more likely that the artist will eat, and it takes a village to make a cheesburger. But if all we cared about was stimulus, we would pass on paintings.
Given that, it seems like fairly good news that so much of the decline in sales is concentrated in luxury goods (mostly jewlery) and women’s apparel. A lot of the cost of these items is related to the scarcity of materials, the skill of designers, the desirability of labels, etc. This isn’t to say that there is anything wrong with valuing those things (it’s not to say that there isn’t, either…) but simply that it doesn’t take a lot of ongoing economic activity to produce them.
The flipside of all this is that it suggests that wealthier consumers are responsible for a disproportionate amount of the drop-off. To a large extent, this is inevitable: they buy more things, so they have more leeway to cut back. Still, it is something of a shame. We desperately need people to spend more, but at the same time, we are in this crisis in part because so many people are overleveraged. It would be nice to see a lot of spending from those safely in the black.*
A final side note: I can’t begin to understand why the sale of expensive jewelry was ever considered recession-proof. I assume this notion was based on some empirical data, though perhaps from less severe downturns. In any case, I would have thought it intuitively obvious that when everyone feels poor, less money will be spent on items that have no function other than advertising one’s wealth. What am I missing?
* I fear this might come across as angry populism. But I am not trying to pass judgment here. I really mean that it would be nice if rich people were spending a lot of money, not that it is wicked of rich people not to spend a lot of money.
Yet surely I’m not the only person to ask the obvious question: How different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole?
Very, very different. I recommend reading the whole thing, as it is too awful to miss.
No one, according to an incredibly unscientific study released by me now. I believe I’ve written about Google Trends before, but if you aren’t familiar with it, you should get familiar. It allows you to see the frequency with which particular words or phrases have appeared in searches and news stories over time. This is a deeply flawed way of measuring interest in a topic, for any number of obvious reasons, but it’s fun, and you learn a lot more than nothing.
So a few hours ago I found myself looking at how the word ‘recession’ was doing. I can only imagine that I was subconciously influenced by the Economist’s R-word Index, which has been around for years, though I’m not aware of having thought about it until afterwards. In any case, here’s the very unsurprising graph for ‘recession’ by itself:
So both journalists and average web-surfers are suddenly much more interested in recessions than they have been in recent years. Nothing surprising in that. But looking at one search term by itself is never that informative, because the raw number of searches is pretty meaningless unless you know a lot about web traffic. So I compared ‘recession’ to a term that represented the weightiest news item of our time: ‘Palin’. Also, to focus on this particular recession, I limited results to the last year. Take a look:
Via Felix Salmon (who thinks it’s ‘genius’, which I would dispute) a meltdown-themed anti-Christmas carol:
I don’t know what should be done about the car companies. Like everyone else on earth, I have some theories about what should be done, but I’m not sufficiently confident that they meet the Despot’s high standards of correctness to air them. The economics here are extremely complicated, and it’s not my strong suit. The politics of the situation, however, are pretty straightforward: the Republican Party is screwing itself over.
It’s more or less an axiom that when bad things happen to the economy, voters look for politicians to blame. Even when voters have other scapegoats in their sites - greedy people in suits, immigrants, an Asian country - there always has to be an elected bad guy who let them do whatever it is they did. As Matt Yglesias loves to point out, the economy is a very good predictor of the popular vote in presidential elections. And politicians on the wrong side of the economic picture generally don’t even challenge the underlying premise; they just argue about who deserves the credit or blame. In ‘96, the Republicans didn’t say: “Presidents don’t have some magical ability to control the business cycle”, they said “Reagan’s magic took a little time to kick in.”
So the timing of the current meltdown is tricky, politically. George Bush is still president. But voters - pace Ed Rendell - are not very bright. If things get much worse, and stay bad for a long time after Obama takes over, this could easily become his fault. Enter the recent falling out between Congressional Republicans and the White House, seemingly purpose built to ensure that the GOP gets the worst of it, come what may.
While the truth is perhaps a bit more complex, the CW is that Republicans in the Senate killed the auto bailout. John Q Voter is confused and skeptical about giving a lot of his money to the folks whose cars he wouldn’t be caught dead in. So this could work out politically, as long as Detroit doesn’t collapse too spectacularly. But now Bush and Paulson are planning to go ahead and bail them out anyway, with funding from TARP. This carries all the downside of a purpose-built bailout, with the added bonus of looking illegitimate and undemocratic.
If the TARP bailout goes through and the Big Three fail anyway, it will look like Bush exceeded his authority and screwed up again, which is bad for the Republicans. If the Big Three survive, and things merely stay as bad as they are, then the Republicans will have stood in the way of an important safety net (which Obama supports), which will be bad for the Republicans. And if the economy actually gets better - sure, I know, but anything is possible - then Obama will be riding a tide of recovery from the Bush Collapse, which will be very bad for the Republicans.
It’s looking ever more likely that President Obama is going to preside over some of the worst years of most Americans’ lives. The GOP is doing a damn good job of keeping him electable in 2012.
The auto industry bailout just passed in the House. But, at least in its current incarnation, it doesn’t have much of a chance in the Senate. For now, it’s a big headline with no news behind it.
Consensus is a rare beast in the blogosphere, but left, right, and center are all speaking with one voice on Mark Pinsky’s call to bring back the Federal Writers Project:
Like Detroit’s troubled Big Three automakers, federal intervention to save the newspaper and magazine industries are highly problematic, at best. Ink-on-paper periodicals are never coming back, and it may be some time before the web can provide well-paying jobs with health benefits–if it ever will. Until then, providing some way to provide young journalists a way to get started, or displaced media workers a way to transition to new occupations, or to retirement, might help–and serve the nation in the process.
A lot of people have responded to this, not because they think it’s an interesting idea or that it might actually happen, but because when someone is this wrong, it’s hard to resist pointing it out, as in the famous “I can’t come to bed, honey, someone on the internet is wrong.” I won’t add to the chorus of refutations, but will simply recommending filing this idea here:
Megan McArdle points to a small Milwaukee community that is considering issuing scrip - locally produced currency - as possible evidence of failure at the Fed:
Scrip was not uncommon in the early 20th century in company towns, where unscrupulous owners used scrip to force people to buy from their stores, rather than the new competition from Montgomery Ward. Or so it was always explained to me. But during the depression, quite a bit of it sprang up during the bank holiday, when no one could get their hands on US currency. The various scrips made a fascinating study in monetary policy, and free banking; some of them had classic hyperinflations, others ran into institutional reputational problems. Many of them had interesting features designed to vastly accelerate the velocity of the money. There are some accounts of miraculous turnarounds in depressed areas based on successful scrip. (Unfortunately, many of those accounts come via the purveyors of the scrip).
But scrip certainly seems to back the notion that the Great Depression was rooted in monetary contraction; money has to be pretty short before people start trying to mint their own. If more scrip plans get going, that will tell us something about the success of Bernanke’s attempts at monetary expansion. When you push on a string, you produce scrip.
Scary stuff. But reading the article she links to, I think it’s pretty clear she’s reading this wrong:
The move would encourage residents to support locally owned businesses, under the assumption national brands won’t take what to them would amount to Monopoly money.
“This promotes local economic strength and community self-reliance,” wrote one of the organizers, Sura Faraj, in a recent entry on her blog. “Other benefits include more community involvement and pride, patronage of local businesses (those that participate), and ultimately the reduction of traffic emissions.”
There isn’t any suggestion in there that these people are having a hard time getting their hands on greenbacks. It’s not clear that they are even corrupt. The charitable interpretation is that they are incredibly stupid. Basically, the idea is to create trade protections at the local level. But, since fake tarriffs would be too difficult to enforce, they’re going to create a de facto embargo against themselves.
Times are bad and getting worse, but comparing this to the depression practice seems more than a bit dramatic. Hard economic times may encourage people to try some poorly thought out financial schemes (though the good economic times we’re leaving aren’t in a position to cast stones), but we’re hardly at the point of printing out Monopoly money. Yet.
This bailout carol is just as tedious as the original, but it’s about as well done as one could hope given the source material, and it has a bunch of terrific photogaffes:
(h/t Felix Salmon)
… is apparently in the ’super-senior tranche’ file of terms you’ll need to get a handle on if you want to know what’s going on with the economy these days. I am more amazed every day about how little anyone seems to know about what we’re going through.
Barney Frank wants Obama to run point on an auto industry bailout. Obama is resisting, pointing out that he’s not President yet. Frank’s response:
“He says we only have one president at a time. I’m afraid that overstates the number of presidents we have. He’s got to remedy that situation.”
Well played, sir.
