Update:Marc Faber, Dr Doom, agrees with MiM; Christina Romer on stimulus bump in GDP; 3Q GDP in up 3.5%;Market Mover Thursday: 3Q GDP 8:30am EST..
UPDATE: Well! The original Dr Doom Marc Faber himself agrees with MiM’s analysis of the GDP and even uses the drunk analogy we used! Go read the whole thing!:
(…)Faber pointed out that there is currently a tug-of-war between the government and corporations and consumers. The government is pushing corporations and consumers to increase leverage, while they try to reduce borrowing in the wake of the financial crisis, he said.”If you have a drunk and he is drunk, you try to solve his problem by giving him more … this is role of the government. In my opinion this worked very badly,” he said…
…Bernanke only ever targets core inflation, Faber pointed out. But that strategy misses the point and it was the main cause of the current crisis, he said.
“How many people in this room can live without food and energy?” he asked a packed conference hall at the World Money Show. “Maybe at the Federal Reserve,” he added….
Reminder of the stimulus impact on this number and its return to zero in 2010 courtesy of Calculated Risk by way of Team TOTUS itself:
From Christina Romer, Chair, Council of Economic Advisers in Testimony before the Joint Economic Committee: From Recession to Recovery
In a report issued on September 10, the Council of Economic Advisers (CEA) provided estimates of the impact of the ARRA on GDP and employment. …
These estimates suggest that the ARRA added two to three percentage points to real GDP growth in the second quarter and three to four percentage points to growth in the third quarter. This implies that much of the moderation of the decline in GDP growth in the second quarter and the anticipated rise in the third quarter is directly attributable to the ARRA.
Fiscal stimulus has its greatest impact on growth around the quarters when it is increasing most strongly. When spending and tax cuts reach their maximum and level off, the contribution to growth returns to roughly zero. This does not mean that stimulus is no longer having an effect. Rather, it means that the effect is to keep GDP above the level it would be at in the absence of stimulus, not to raise growth further. Most analysts predict that the fiscal stimulus will have its greatest impact on growth in the second and third quarters of 2009. By mid-2010, fiscal stimulus will likely be contributing little to growth.
emphasis addedThe impact on GDP will be smaller going forward, and according to Dr. Romer, the impact will be around zero by mid next year, and will be a drag later in 2010 (as stimulus is reduced).
Update: El Rushbo on shenanigans with the stimulus job numbers:
Courtesy of therightscoop
Update: Diane Swonk on CNBC notes 1.7% of this GDP came from Clunkers. Rick Santelli agrees with MiM, it is a number driven by inventory builds and clunkers, it is less than 2% in reality and it is unsustainable without govt spending…GDP is important in part because it traditionally means you know JOBS. this is NOT a job creating GDP recovery number, this is a head fake, 4Q will have the homebuyer tax credit bump too, 1Q 10 2Q 10 are the real ones to watch and ONLY if the govt STOPS the Keynesian spending which IS NOT WORKING, THERE ARE STILL NO JOBS!
Ride Zombie Bull Market Ride!
Update: Data in: 3Q GDP up 3.5% (clunkers, home credits, inventory builds,) MiM is still predicting a double dip, we are right on schedule…UE claims higher than expected…I predict a slew of speeches from Team TOTUS patting themselves on the back for what is IMO a fake number driven by government intervention with ridiculous spending programs like clunkers and homebuyer credits. When they are producing jobs and actual sustained durable good orders and retail sales THEN I will call it a recovery.
But we will be forced to listen to TOTUS patting himself on the back for a while first, ugh. And when it collapses AGAIN (I predict the double dip in 1Q or 2Q 2010 depending when the WH runs out of spending programs as the bond vigilantes force rates higher and the Fed either wakes up and tightens or lets hyperinflation kill the consumer) will TOTUS then re-blame GWB?
-FOX is reporting taxpayers spent 24,000 per frakkin clunker, unreal (Edmunds.com). FOX notes the Govt waits one hour after GDP release to talk about it so enjoy your TV while you can, lol.
The U.S. economy grew in the third quarter for the first time in a year as consumer spending and investment in new home-building rebounded, data showed on Thursday, unofficially ending the worst recession in 70 years..
..Initial claims for state unemployment insurance declined, though the number was higher than expected, to a seasonally adjusted 530,000 in the week ended Oct. 24, the Labor Department said. Analysts polled by Reuters had forecast claims to fall to 521,000 last week from 531,000.
The Commerce Department, in its first estimate of third-quarter gross domestic product, said the economy grew at a 3.5 percent annual rate, the fastest pace since the third quarter of 2007, after contracting 0.7 percent in the April-June period.
The growth pace in GDP, which measures total goods and services output within U.S. borders, was above market expectations for a 3.3 percent rate. The economy last grew in the second quarter of 2008…
Update: Martin Mull and Horatio Hornblower on the Dems insurance mandate and $3800.00 penalties…
Update:09/09 10:00pm AZ time: Lookee here, Daniel Henninger of the WSJ has an opinion piece going up for tomorrow that agrees with MiM but in much more palatable language, lol:
…The most recent Wall Street Journal/NBC poll has 87% of the public somewhat or very dissatisfied with the economy. The unemployment rate is likely to go above 10% for all 2010. Whatever GDP growth may occur, there is no evidence of new-job creation. Gold’s price has risen above $1,000, suggesting inflation is swimming below the economy’s flat surface. China is stockpiling gold and worrying out loud about the weak dollar. A U.N. panel said this week the world should abandon the dollar as the world’s anchor currency.
Just now, Barack Obama’s mad obsession with arcane health-insurance puzzles looks beside the point….
I thought these Critters were living in an Ivory Tower looking down on Americans without understanding them, now I am wondering if they are actually living in a tower in Mordor instead…
MiM was for a universal mandate to bring down the cost of high usage insureds, you spread the risk over a wider pool etc etc but that was, of course, BEFORE the economy WENT OFF A FRAKKIN CLIFF!!!@ HELLO??? Is anybody checking these Critters in DC for a pulse??
How in the hexx can they try to pass the mandate and penalties in THIS economic environment? In 1994 this would work, hell in 2004 this would work, in 2007 this would work. You know, in an EXPANDING economy.
But now we have a RETRACTING economy and MASSIVE UNEMPLOYMENT.. Which is of course why MiM thinks this is POLITICAL, Congress and TOTUS pushing it now, not an actual health care delivery crisis. And pullleeeezze don’t tell me how this does not kick in until 2013. People will FEEL the pain NOW and revolt against it and kill the plan or as I predict take control back in 2010 (which I think will happen in the House regardless).
And let us not forget the impact this will have on CAPITAL MARKETS and HIRING which are, of course, FORWARD LOOKING!!!!! D’uh!!! Way to kill an incipient recovery. We cannot even invest in DEFENSIVE stock plays, like KO!!! (Coca Cola) b/c even CONSUMER STAPLES like lightbulbs (and next I’m sure Teh Evvvvvil Two-Ply toilet paper killing Gaia!) are under assault (Cheerios and sugary drink makers, Tylenol in flu season, look out, Big Brother coming to frak with you too!)
People are LOSING THEIR HOMES. Food Stamp usage is at a RECORD high. Now is NOT the time to tell people to get ready for another ginormous govt program and TAX.
And if it can wait until 2013 to kick in, why in the name of all that is Holy are we ramming it through NOW?? Yeah POLITICAL BS that’s why. So take your moral imperative and pack it up with your condescension and take a long walk neoprogs…a 4 year walk according to Baucus…
You know what’s a crisis? THE DAMNED UNEMPLOYMENT RATE IS A CRISIS!
Anywho, H/T to the commenter on McCardle’s site who said the Baucus $3800.00 penalty for a family who does NOT buy health insurance under his plan is comparable to the Python Martin Mull! skit wherein Christopher Columbus in reply to his Officer telling him ‘The men have not eaten in days sir” says “Well Make them eat!”
Gee it’s almost like some band of intellectual elites far removed from the realities of everyday Americans lives are coming up with these ideas isn’t it?
Mashup by iRat13
High-income people being more inclined to believe that everyone ought to have to buy health insurance has sort of a Marie Antoinette quality to it. (“Why the hell aren’t you buying health insurance?” “Uh, I don’t have enought money?”)
Or the old Python Christopher Columbus sketch (from whence comes the song “Men, Men, Men”): “Sir, the men haven’t eaten for days.” Columbus replies: “Well, make them eat!
Market on ‘Sugar High,’ Economy Still Asleep: El-Erian – CNBC.com
Vodpod videos no longer available.
The stock market spent July on a “sugar high,” rising to levels not justified by an economy that is still limping along, Pimco’s Mohamed El-Erian told CNBC. Despite proclamations from some that the recession is over, El-Erian, co-chief executive officer of the largest bond fund manager in the world, said much more needs to happen before the economy registers real growth.
“The July part of the rally is a bit of a sugar high,” he said in a live interview. “We need final demand. We need a feeling that deleveraging in the private sector has run its course, that people feel confident now to engage in consumption, investment.” It’s not happening yet on the national level, it’s not yet happening at the global level.”El-Erian stuck with predictions from various Pimco executives recently that the economy would be mired in gross domestic product growth of about 1 to 2 percent for the foreseeable future.”We’re not going to go back to where we’ve come from,” he said.
While the banking sector has taken much of the focus during the current recession, El-Erian said it’s now about the real economy, particularly wages and unemployment. Those two areas must recover, and that will take a while, he added.
Update: Taxes, taxes everywhere and not a job in sight and when is a stimulus not a stimulus? When it creates no jobs and you tax the crap out of people…
ZOMG! What are these people thinking?! They sold Obama as a Clinton Like Pro Business Moderate Dem. Ha I say HA! AS IF!!!!
Tell me that doesnt look like Joe Biden all the way on the right? Remember when 100 billion dollars was a lot of money?:
…A huge new income surtax. The bill’s main financing comes from another tax increase on top of the increase already scheduled for 2011 under Mr. Obama’s budget. The surtax starts at one percentage point for adjusted gross income above $350,000 in 2011, rising to two points in 2013; a 1.5 point surtax at incomes above $500,000, rising to three in 2013; and a whopping 5.4 percentage points in 2011 and beyond on incomes above $1 million.
This would raise the top marginal federal tax rate back to roughly 47% or 48%, if you include the Medicare tax and the phase-out of certain deductions and exemptions. With the current top rate at 35%, this would be the largest rate increase outside the Great Depression or world wars.
The average U.S. top combined state-federal marginal tax rate would hit about 52%. This would be higher than in all but three (Denmark, Sweden, Belgium) of the 30 countries measured by the OECD. According to the nearby table compiled by the Heritage Foundation, taxpayers in at least five U.S. states would pay higher marginal rates even than Sweden. South Korea, which Democrats worry is stealing American jobs, would be able to grab even more as its highest rate is a far more competitive 38.5%.
House Democrats say they deserve credit for being honest about the tax increases needed to fund their ambitions. But then they also claim that this surtax would raise $544 billion in new revenue over 10 years. America’s millionaires aren’t that stupid; far fewer of them will pay these rates for very long, if at all. They will find ways to shelter income, either by investing differently or simply working less. Small businesses that pay at the individual rate will shift to pay the 35% corporate rate. When the revenue doesn’t materialize, Democrats will move to soak the middle class with a European-style value-added tax.
Practice your ‘European’ style living now. I will go with Germany..dance Dieter dance!!
The new payroll taxes and penalties in the health care proposal:
…A new payroll tax. Unemployment is at 9.5% and rising, but Democrats will nonetheless impose a new eight percentage point payroll tax on employers who don’t provide health insurance for employees. This is on top of the current 15% payroll tax, and in addition to a new 2.5-percentage point tax on individuals who don’t buy health insurance. This means that any employer with more than $400,000 in payroll would have to pay at least 25% above the salary to hire someone. Result: Many fewer new jobs, with a higher structural jobless rate, much as Europe has experienced as its welfare states have expanded.
Other new taxes, including an as yet undetermined levy on private health plans. This tax, which Democrats say could raise $100 billion or so, would make it even harder for private plans to compete with the government plan, which would already benefit from government subsidies and lower capital costs. For good measure, the House bill also gets the ball rolling on tax increases on foreign-source corporate income….
In other age old philosophical questions, when is a stimulus NOT a stimulus? When Team TOTUS, who said we would see IMMEDIATE results from the stimulus, is now saying it worked as expected and was NOT supposed to work right away..Uhmm wha? Ed at HotAir has it covered
…Old White House spin: Porkulus has stimulated the economy and “saved or created” 150,000 jobs. New White House spin: Stimulus? What stimulus? ABC’s Yunji de NIes reports from somewhere down the rabbit hole, er, the White House briefing room:
Turns out the $787 billion “American Recovery and Reinvestment Act” (AARA) was not designed for full economic recovery, but rather to “stabilize” the downturn. That’s the word from White House officials today, who held off-camera briefings with reporters on how the AARA is working so far.
“This legislation was designed to cushion the downturn,” said White House Press Secretary Robert Gibbs. “That’s why we have always talked about this as one function of economic recovery.”
When pressed about the change in terminology, Gibbs said he was not trying to temper expectations after the fact….
Update: Via HA, House GOP Conference releases this video last night on the stimulus:
Oil, Rates May Stifle Recovery: Roubini – CNBC.com
The price of oil, which is rising too fast, and long-term interest rates that are beginning to creep up are likely to suppress a budding recovery, Nouriel Roubini, president of RGE Monitor, told CNBC Monday.
DOW off 100 now….
Vodpod videos no longer available.
Market Mover Tuesday: About that Housing Bottom…Housing Starts Drop….
I mean it is good that we arent building more houses cuz frankly we have an 18 month supply right now even without the shadow inventory of imminent foreclosures and then add the many who want to move and cannot b/c they cannot sell their house in this market..we do not need more houses..but the markets want it to be over soo badly and want construction jobs soo badly that they fooled themselves into thinking we were already at the bottom and April starts would be up…the homebuilders stocks were crazy high yesterday, that faux rally is over….
..New U.S. housing starts and permits unexpectedly fell to record lows in April, a government report showed on Tuesday, denting hopes that stability in the housing market was imminent.
The Commerce Department said housing starts fell 12.8 percent to a seasonally adjusted annual rate of 458,000 units, the lowest on records dating back to January 1959, from March’s upwardly revised 525,000 units.
Compared to the same period last year, housing starts tumbled 54.2 percent.
Analysts polled by Reuters had expected an annual rate of 520,000 units for April…
Update: Results will now be released Thursday…Market Mover Friday: Stress Test Results ‘delayed’ as Banks appeal findings…
Update: Results scheduled to be released Monday, now they say Thursday:
Results of the “stress tests” conducted on the nation’s 19 biggest financial institutions will be released late Thursday afternoon and include information on both the individual banks as well as aggregate data, CNBC has learned.
The results of the tests, which were conducted during April, will include estimated losses in certain loan categories as well as the banks’ resources to absorb potential losses, a source said. The source added that the information is not a solvency test….
The Federal Reserve will postpone the release of stress tests on the biggest U.S. banks while executives debate preliminary findings with examiners, according to government and industry officials.
The results, originally scheduled for publication on May 4, now may not be revealed until toward the end of next week, said the people, who declined to be identified. A new release date may be announced as soon as tomorrow, they said.
They really painted themselves into a corner on this:
At least six of the 19 largest U.S. banks require additional capital, according to preliminary results of government stress tests, people briefed on the matter said this week. While some of the lenders may need extra cash injections from the government, most of the capital is likely to come from converting preferred shares to common equity, the people said.
By pushing conversions, rather than federal assistance, the government would allow banks to shore themselves up without the political taint that has soured both Wall Street and Congress on the bailouts. The risk is that, along with diluting existing shareholders, the government action won’t seem strong enough.
Here is the best, most NO SHXT SHERLOCK line of the piece (and the process in fact):
Regulators and bank executives are concerned about how the disclosure is handled because weaker institutions could suffer a collapse in their stock prices.
You mean Uncle Sam is gonna tell us these guys cant survive a financial heart attack and investors might pull their money out? The hell you say! I AM SHOCKED! BWAAAAHAAAAAA frakkin maroons…..
Moderate in the Middle 