Is The Economy Starting To Get Better?

All the financial types are saying that the recession is bottoming. They expect housing, car sales, consumption to pick up soon. So they’re buying stocks, “snapping up” houses to rent out later…
All I can say is based on what? Someone tell me what is going to drive a recovery of the economy. The stimulus is going to help a lot for a little while, but there is nothing I can see for a very long time that is a reason to think real jobs will be created in this world. People can’t put any more on their credit cards, they can’t borrow any more on their houses of they still have one, and they certainly aren’t going to be getitng a raise.
I think this current fit of economic optimism is just one more instance — of so many — of a lot of entitled people living in insulated, well-to-do bubbles (NY, DC), looking to each other for signs of what is going on because they don’t have any contact with the people who are the economy. It’s hard to understand what it is like trying to get by in America when you and everyone around you gets million-dollar bonuses.
This is how they missed the housing bubble. This is how they missed the debt bomb.
Eventually, if it really happens, massive investment in a green economy and a national health care system will start to pick things up again. But that is a loooong way off, and the powerholders of today are going to fight tooth and nail to block it. Exxon has a lot of money and influence. So do the big insurance companies. Maybe not as much as Wall Street but they’re waiting their turn.
So, anyway, I’m not holding my breath that recovery is just around the corner. I don’t see what will drive it.

5 thoughts on “Is The Economy Starting To Get Better?

  1. You know, I know, all your readers know the Administration is on a massive spending binge. And you wonder why you cannot see recovery?
    I am holding my put positions (short) on the S&P 500. Earning will continue down.
    This documents how President BUSH screwed it up. But Cap and trade has already crashed. Energy is aimless. In 3 months the MSM will be forced to report what has NOT been accomplished.
    Doubling Down on President Bush’s Economic Policies
    President Obama has framed his budget as a break from the “failed policies” of the Bush Admin­istration. Actually, his budget doubles down on President George W. Bush’s borrow, spend, and bail­out policies. For example:
    * President Bush expanded the federal budget by a historic $700 billion through 2008. President Obama would add another $1 trillion.[3]
    * President Bush began a string of expensive finan­cial bailouts. President Obama is accelerating that course.[4]
    * President Bush created a Medicare drug entitle­ment that will cost an estimated $800 billion in its first decade. President Obama has proposed a $634 billion down payment on a new govern­ment health care fund.
    * President Bush increased federal education spending 58 percent faster than inflation. Presi­dent Obama would double it.[5]
    * President Bush became the first President to spend 3 percent of GDP on federal antipoverty programs. President Obama has already in­creased this spending by 20 percent.[6]
    * President Bush tilted the income tax burden more toward upper-income taxpayers. President Obama would continue that trend.[7]
    President Bush ran budget deficits averaging $300 billion annually. After harshly criticizing Bush’s budget deficits, President Obama pro­posed a budget that would run deficits averaging $600 billion even after the economy recovers and the troops return home from Iraq.
    The President’s tax policy is the only sharp break in economic policy. President Bush reduced taxes by approximately $2 trillion; President Obama has proposed raising taxes by $1.4 trillion. In doing so, President Obama has rejected the most successful Bush fiscal policy. In the 18 months following the 2003 tax rate cuts, economic growth rates doubled, the stock market surged 32 percent, and the econ­omy created 1.8 million jobs, followed by 5.2 mil­lion more jobs in the next 27 months.[8] Not until the housing bubble burst several years later did the economy finally lose steam. Pro-growth lawmakers should embrace tax relief policies that have proven successful, while rejecting the runaway spending that has been business as usual in Washington.
    The Mythical “$2 Trillion in Savings”
    During his recent address to a joint session of Congress, President Obama previewed his budget by asserting that the Administration has “already identified $2 trillion in savings over the next decade.”[9] This is simply not true. His budget increases spending by $1 trillion over the next decade, which he attempts to offset by reclassifying as “savings” $1.4 trillion in tax increases and $1.5 trillion in reduced spending in Iraq. However, gov­ernment savings have always referred to spending cuts that save taxpayer dollars, not tax increases that feed the government. Furthermore, the Iraq “sav­ings” are measured against an implausible spending baseline that assumes a permanent $180 billion bud­get for the global war on terrorism, without any troop withdrawals through 2019. This is the equiv­alent of a family deciding to “save” $10,000 by first assuming an expensive vacation and then not taking it. Without these false savings, only the $1 trillion spending hike remains, and that does not account for the extra $250 billion proposed for another round of financial bailouts in the current fiscal year.
    Despite the claimed savings, this budget undeni­ably expands government. Before the recession, rev­enues were 18 percent of GDP and spending was 20 percent. After the recession, President Obama would maintain revenues slightly above 19 percent of GDP and spending at over 22 percent.[10] Thus, new tax revenues would finance new spending, rather than deficit reduction. President Obama’s structural bud­get deficit would exceed President Bush’s.

  2. That spending by the government is the ONLY thing that might drive a recovery. It’s called INVESTMENT. Governbment is the only thing that drives the economy. That includes the law that enforce contracts, etc.
    When Eisenhower invested in the interstate highway syste it paid off HUGELY – years later.
    Under Reagan and then Bush they stopped investing and maintaining existing infrastrucute, giving the money instead of the rich. Now we are living with the results.

  3. You are correct about Ike’s investment…and affirming the criticisms of the Stimulus plan. I understand about 20% of THE STIMULUS goes to similar programs.
    But if you are correct, that Obama’s plan is correct, why the delay in recovery? A troubling mystery.
    Remember the sustained recovery in the markets as Tip O’Neil came together with CA wunderkind Reagan and passed a stimulus program that worked?
    Reagan knew exactly which economic policies he wanted.
    Obama depends on guys like Larry Summers. You gotta admit he is no Paul Krugman.
    WASHINGTON — Top White House economic adviser Lawrence Summers received about $5.2 million over the past year in compensation from hedge fund D.E. Shaw, and also received hundreds of thousands of dollars in speaking fees from major financial institutions.
    A financial disclosure form released by the White House Friday afternoon shows that Mr. Summers made frequent appearances before Wall Street firms including J.P. Morgan, Citigroup, Goldman Sachs and Lehman Brothers. He also received significant income from Harvard University and from investments, the form shows.
    In total, Mr. Summers made a total of about 40 speaking appearances to financial sector firms and other places, with fees totaling about $2.77 million. Fees ranged from $10,000 for a Yale University speech to $135,000 for an appearance paid for by Goldman Sachs & Co.
    The disclosure — in a financial report that is required for federal office holders — comes as Mr. Summers is involved in shaping the Obama administration’s policy decisions on the financial meltdown as well as the broader recession. Among the many decisions the economic team has wrestled with has been whether to step up regulation of hedge funds, one of the most contentious subjects during a summit of world leaders this week. European nations pushed for tougher rules, while the Obama administration preferred a less stringent approach.
    Asked to comment, White House spokesman Ben LaBolt said that, “from the first days of the administration, we have bolstered accountability over banks” and made other rules changes so that “the influence of lobbyists is curbed, executive compensation is reined in, and firms are required to show how they will preserve or expand lending using government funds.” He added: “Dr. Summers has been at the forefront of this administration’s work to shore up our nation’s financial system and to put in place a regulatory framework that will strengthen the financial system and its oversight — all in an effort to help the families across America who have paid a very steep price for risky decisions made by Wall Street executives.”
    Wall St Journal Apr 4th,2009
    We’ve allowed an oligarchy of Central Bankers, the Big 5 Investment banks (3 of which are now destroyed), Ivy league MBA, and Congress/Clinton/Bush to seize and control policy.

  4. Delay in the recovery? Obama has only been President a little over 2 months! We all have high expectations, especially after years of Bush, but really. Getting that stimulus money through the pipeline will take a while, but when it hits it will be significant. But no tenough to make up for decades of neglect of infrastructure and investment.
    And I think you should look at the timelines of Reagan’s performance. It was YEARS not months before there was recovery from that recession.
    And shorten your comments or get a blog. Then I’ll come and leave comments.

  5. Forgive the length but your friends might enjoy this ‘tip’ on market opportunities — a lower risk use of Options. Something I am doing in my personal accounts.
    This first step leads to a 13% return on Wells Fargo on May 15th…with caveats.
    Buy 100 shares of Wells Fargo WFC, $16.30, but NOT as a long term investment. Cost = $1,630 + $12 fee.
    Sell the $17.00 Covered Call option expiring, 2 months out in May for $2.20 per share. $220 less about $10 fee is deposited in your account. The buyer of your covered call has the right to “Call away” WFC if it is above $17 on May 16th.
    You must hold the WFC until the option expires ( or you buy the option back.) A conservative move because you have the asset, 100 shares of WFC
    If WFC closes above 17, the stock is called, it is sold for you and you keep the $220. It went up $.70 cents from your buy price.
    Total profit
    $2.20 Cvrd Call
    $.7 stock increase.
    You made about 13% on you money and have it all including the covered call sales amount.
    IF WFC closes below $17.00 the contract has expired and you keep the stock and the $2.20
    BIG RISK. WFC could drop 50% again back to $8.00
    A DOWN scenario but you are still up:
    If it keeps falling you are going to write the Covered Call every 2 months as you hang on to the stock (it has to rise to get called away)
    you sell it 6 times in the year for about $2.10 each time and make $12.60 on the originally priced $16.30 WFC stock.
    You bought 100 shares for $16.3
    It drops to $8
    You have received $12 per share in Covered Call sales and still have the stock paying dividends.
    You are stimulating the markets, adding liquidity, and perhaps stimulating your positive cash flow.
    Good success with your cash, gold, and investments so you’ll have more to give.

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