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FDR posts

House Republicans take page out of Hoover's 1930s play book with spending freeze plan

Posted Mar 9th 2009 1:10PM by Joseph Lazzaro (RSS feed)
Filed under: Politics, Recession

Readers of this space know that the emphasis is placed on the economic, on commerce, and business trends, with a general avoidance of goings-on inside the beltway.

However, the financial crisis (which spawned federal bank bail-out legislation) and the nation's pronounced recession (which requires fiscal stimulus to end), has meant that things occurring in Washington once again have great relevance for investors.

And one current D.C. development must be evaluated: the House Republican leadership's decision to seek a federal spending freeze for the fiscal 2010 federal budget, The AP reported.

Continue reading House Republicans take page out of Hoover's 1930s play book with spending freeze plan

NYT's Krugman: Think economic momentum, not balanced budgets

Posted Nov 17th 2008 4:40PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Economic data, Politics, Recession

New York Times columnist and Nobel Prize-winning economist Paul Krugman underscores that those who are thinking in terms of a balanced federal budget now are doing a serious disservice to the economy, and, by extension, to the nation.

It's important for the U.S. Government to return to a balanced budget when the economy returns to health, but it is critically important for Congress to approve a large fiscal stimulus to help the U.S. economy recover from the current recession, he said.

Sees danger of vicious cycle

That's because doing so will help end what Krugman argues is a vicious cycle of contraction that's beginning to play itself out in the economy. Rising unemployment will lead to further reductions in consumer spending, which will lead to further business cutbacks in production and more job cuts, which will lead to further reductions in consumer spending, contracting the economy even more, and so on. It's a destructive cycle that has to be stopped, and fiscal stimulus is part of the healing: it will get momentum headed in the constructive direction.

For those who doubt the harm that prematurely trying to balance a budget can do to the U.S. economy, Krugman offered FDR's premature attempt to balance the budget in 1937: it almost destroyed the New Deal and the economic recovery taking place in the nation at that time.

Continue reading NYT's Krugman: Think economic momentum, not balanced budgets

NYT's Krugman to President-elect Obama: Think big

Posted Nov 11th 2008 4:00PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Politics, Recession, Financial Crisis

New York Times (NYSE: NYT) columnist and Nobel Prize-winning economist Paul Krugman argues, in so many words, that, indeed, the United States must go back, to get to the future.

Krugman's advice for President-elect Barack Obama? Think big. Contrary to selected, conservative arguments about President Franklin D. Roosevelt's New Deal, the reason the New Deal had limited, short-term success was the fact that FDR's economic policies were too cautious, he said.

The New Deal: new life

The New Deal's long-term success and achievements, including the structural changes to the U.S. economy (including Social Security and bank deposit insurance), have proved to be both durable and essential, most economists, including Krugman, agree.

Hence, President-elect Obama should think big from the get-go, Krugman says, and avoid the mistaken belief that 'government spending made the Great Depression worse,' and Obama should move forward with a large fiscal stimulus to put people back to work, for work that needs to be done in these United States.

Continue reading NYT's Krugman to President-elect Obama: Think big

Once again, Keynes holds the keys to economic recovery

Posted Oct 29th 2008 3:20PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Recession, Financial Crisis

These days, investors have to search far and wide to find positive data points, let alone a positive outlook, for the U.S. and global economies.

And, without question, the financial crisis and slowing global growth, combined with previously weak economic fundamentals in the U.S., are indeed formidable obstacles to any investor's hope for optimism.

Still, perhaps the real the danger lies in not where we are but in denying where we can be, and that's where John Maynard Keynes comes in.

For those unfamiliar, Keynes, along with Milton Friedman and Karl Marx, are the three major philosophers of modern economics.

In the United States, policy markers since 1981 have favored market absolutism, Friedman's view, peppered by government intervention, Keynes' view, when needed.

More recently, during the current decade, market absolutists appeared to have had free rein. Some of these market absolutists are now arguing that 'the market should run its course' and 'recessions, even deep recessions, are an essential part of the business cycle,' etc. Don't believe any of it for a moment, Keynes would say.

Expansion is the normal condition

It was part of the genius of Keynes that he revealed to us that the natural state of the economy is expansion and that a downturn is "extraordinary imbecility." Further, Keynes also reminds us that recessions, or economic downturns, are not necessarily self-correcting.

Keynes also believed that the market economy, in the form of mixed capitalism, could survive only if it earned the support of the public by raising living standards.

Continue reading Once again, Keynes holds the keys to economic recovery

Could U.S. economy, American people tolerate more government intervention?

Posted Sep 5th 2008 5:08PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Other issues, Politics, Presidential elections, Recession

Could the U.S. economy tolerate, and, equally significant, will the American people push the nation's chief executive, the president, in the direction of more government intervention?

The view from here is: probably not. Everything in the American ethos and culture speaks against it.

Unlike in France, where the French Government is simply, "France," Americans, for the most part, view their government -- save defense spending -- usually as part of the problem, not the solution. 'Government is best which governs least' is a longstanding Americanism. And most investors/readers know about candidates who say they want to "get the Washington bureaucrats off the backs of the American people" and "clean up the mess in Washington!"

Americans are anti-central government, and they are anti-state (they generally dislike the limited federal government that exists). In the United States, it is always private first, public second.

Continue reading Could U.S. economy, American people tolerate more government intervention?

Stupid question: Can the U.S. handle more housing stress?

Posted Aug 19th 2008 3:32PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Housing, Federal Reserve, Recession

Sometimes -- but by no means always -- the stupid questions are the most illuminating.

Tuesday's 'stupid question' concerns stress and the U.S. economy. Namely, could the U.S. economy handle more housing stress? Or, put another way, what would the U.S. economy look like with another round of major write-offs for housing-related losses?

"It's not an economic model we want to project, but project we must," economist David H. Wang said. "First, for one thing, another round of large write-offs would, as they say, end all doubt regarding a U.S. recession. We would record negative GDP for Q3 and Q4, at minimum, most likely for Q1 2009 as well."

"Second, you're looking at additional consolidation in investment banking and commercial banking," Wang said. "Third, there would be considerable U.S. Government involvement, the scope and amount of intervention by the U.S. Treasury and Fed [U.S. Federal Reserve] is difficult to specify, until the size of the problem is known."

It's hard to identify a silver lining in the above, but Wang found one, "but we don't want to go there," he said. Another series of large, housing-related write-offs "would most likely propel Congressionally-backed, federally-directed structural changes in banking, mortgage finance, securities, and financial regulation," Wang said.

"It's one thing if the nature of the bailout is another $50 or $100 billion. But if it amounts to the takeover of a large bank or Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), the American economy would see its biggest changes since the New Deal," Wang said. "These changes would most likely end, once and for all, the 'heads-the-banks-win/tails-the-government-pays' banking system. You'd most likely see a two-tier banking system."

Not the 'end of the beginning' for housing losses?

Moreover, there are signs that it's not 'the end of the beginning' regarding housing and credit market stress, at least in the view of the former chief economist for the International Monetary Fund.

Continue reading Stupid question: Can the U.S. handle more housing stress?

Will a new U.S. president lead to a new mortgage system?

Posted Jul 30th 2008 4:55PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Economic data, Politics, Housing, Recession

Most Americans realize that every new U.S. president, upon taking the oath of office, faces his/her share of economic problems, none of which originated on his watch.

President John F. Kennedy spoke to this when he said (and someone said it before him), "It's true. Life is not fair. Some men go to war, and others remain at home. Among those who go to war, some men are sent to the front lines, while others stay behind. It's true. Life is not fair."

Still, although each age has seen its share of formidable economic problems, the scope, seriousness, and systemic impact of economic problems facing the new president, be it Democrat Barack Obama or Republican John McCain, may represent the biggest economic decisions since those President Franklin D. Roosevelt confronted upon taking office in the depths of the Great Depression in 1933.

What's one issue likely to give the president more gray hair? The kinds of systemic reforms to lobby for, on the heels of the federal housing bailout of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) following the collapse of the housing market and rise in mortgage defaults, said economist David H. Wang. The housing bailout will further increase the U.S Government's annual budget deficit, which is expected to reach $490 billion in Fiscal 2009, Wang said.

Continue reading Will a new U.S. president lead to a new mortgage system?

Soros: Fannie, Freddie crisis is not the last

Posted Jul 15th 2008 9:42AM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Bad news, Economic data, Housing, Federal Reserve, Recession

So far, billionaire investor George Soros says he doesn't see a light at the end of the tunnel; at least not yet.

Soros told Reuters Monday the crisis over Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) will not be the last, and that the wider credit crunch will continue to effect the already anemic-growth (or worse) U.S. economy.

On Monday, the U.S. Treasury announced a plan to shore-up Fannie Mae and Freddie Mac, including authorization to buy unlimited stakes in and lend to the companies, aimed at stemming a collapse in confidence, Bloomberg News reported Monday. Soros said the U.S. Treasury's plan, and if need be, the resources of the U.S. Federal Reserve, will keep Fannie and Freddie functioning, but that does not blot-out the main negative: the drag effect of home foreclosures on the U.S. economy, Reuters reported.

'Most serious financial crisis of our lifetime'

Calling the year-long global financial market turmoil "the most serious financial crisis of our lifetime," Soros said the negative impact of foreclosures and the credit crisis is likely to increase, creating a deeper U.S. recession.

Economist Peter Dawson told BloggingStocks that "while Soros provided a candid description of current events, no doubt derived from considerable research, he may have been a little too stark . . . seeing too much of one side of the asset / liability ledger."

Continue reading Soros: Fannie, Freddie crisis is not the last

New world (wide web) order: AOL, News Corp, Disney summit

Posted Apr 27th 2006 12:14PM by Anne Metz (RSS feed)
Filed under: Management, Industry, Conventions and conferences, Television, Internet, Time Warner (TWX)

The Big Three come together to discuss the global balance of power. The Yalta Conference?

No, the Milken Institute's 9th Annual Global Conference. Yesterday in Beverly Hills, media men from News Corp, AOL, and Walt Disney came together to powwow.

But you could certainly be forgiven for confusing the two. That's why I'm offering you, dear readers, a quick primer to keep these things straight:

The Yalta Conference vs. The Milken Institute: Which is Doper?

Players:

Yalta Conference: Franklin Delano Roosevelt, USA; Joseph Stalin, USSR; Winston Churchill, United Kingdom

Milken Institute: Jonathan Miller, AOL Chairman and Chief Executive; Robert Iger, Walt Disney Chief Executive; Peter Chernin, News Corp President and COO

Advantage: Yalta Conference

Location:

Yalta Conference: Yalta, a city in Ukraine, on the north coast of the Black Sea, 1945

Milken Institute: Beverly Hills, home of swimming pools, movie stars, and nip-and-tuck procedures

Advantage: Milken Institute

Continue reading New world (wide web) order: AOL, News Corp, Disney summit

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