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Petraeus for President? Betting Market Alert!
Tweet Share on Facebook October 15, 2008 Comment (5)I am an admitted Intrade betting market junkie. (A spectator only, mind you.) And I hope the day after the election, it launches contracts for the 2012 presidential race. If Barack Obama loses, it's gotta be HRC and then a bunch of other dudes, right? And if John McCain loses—an 80 percent probability, according to Intrade—Sarah Palin would have to be considered either the front-runner or pretty darn close to it, you betcha. I imagine Mitt Romney and Mike Huckabee might also be in the mix, too.
But what about Gen. David Petraeus? Petraeus was mentioned as a possible surprise McCain veep pick this time around—there is a huge photo at McCain HQ of the two of them shaking hands—and is rumored to harbor high political ambitions. And I just read this bit of inside analysis about a possible Petraeus presidential bid from geopolitical strategist Tom Barnett, though he thinks 2016 is more likely:
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David Frum's Weird Attack on Larry Kudlow
Tweet Share on Facebook October 15, 2008 Comment (32)This following quote will surely make David "Axis of Evil" Frum shake his head in disbelief. "When it comes to the conservative base and economics," a White House political adviser told me recently, "the only two things that matter are the [Wall Street] Journal's editorial page and Larry Kudlow."
Frum, a conservative pundit and former Bush speechwriter, has leveled some pretty biting criticism at Kudlow (and like-thinking economic conservatives), without mentioning him by name. In a recent piece of commentary that basically adopts Barack Obama's stagnant-wages-and-rising-income-inequality critique of Bushonomics, Frum writes the following: "Even before the Wall Street crisis, the American economy had underperformed from the point of view of the average worker. While national output rose strongly, most of the gains went to the top five percent of households. Most Republicans have been unprepared to even acknowledge these facts, much less explain them. They insisted that the Bush economy was 'the greatest story never told.'"
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Right to McCain: Your New Economic Plan Stinks
Tweet Share on Facebook October 14, 2008 Comment (21)John McCain unveiled several new economic ideas today to help the struggling economy. The feedback I am getting from pro-growth types on the right is not good. Many had hoped McCain would unveil some sort of new middle-class tax cuts on income or investments, perhaps a zero capital gains tax rate to appeal to all those hurting 401k investors. The logic is this: What's really going to hurt homeowners is the loss of a job. We may be facing the worse downturn in a generation. Why not a broad tax cut like we had in 1981?
I asked McCain economic adviser Douglas Holtz-Eakin that very question today during a conference call. He didn't answer it. He said something about how McCain is going to take steps that are "in the best interests of the American people," particularly seniors and homeowners, and how these new steps will show Americans that they have "a government that is responding" to their needs. Hoo boy. I can already predict the E-mails I'm going to get: "None of what McCain is proposing will help return the economy to prosperity. They just make the downturn a bit less painful."
Now certainly his $300 billion idea to give new mortgages to underwater homeowners is a big idea. And some conservative economists favor such a plan as a way of breaking the falling home price-foreclosure cycle. But as my friend Larry Kudlow likes to say, when it comes to domestic policy, "Republicans are good at one thing: cutting taxes."
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Why Obamanomics Isn't Clintonomics
Tweet Share on Facebook October 14, 2008 Comment (2)Is Barack Obama really comparing his economic plan to Bill Clinton's? Take a look at this chunk from a recent Boston Globe story:
With the economy in crisis and Election Day in sight, Obama can't say enough about the Clinton epoch—the job growth, the budget surpluses, the broad prosperity—and often lauds the former president's economic stewardship as a model. "We need to do what we did in the 1990s and create millions of new jobs and not lose them," he told 6,000 people in Abington, outside Philadelphia, last week. "We need to do what we did in the 1990s and make sure people's incomes are going up and not down. We need to do what a guy named Bill Clinton did in the 1990s and put people first again."
Me: Obama's economic plan is quite similar to the "putting people first" agenda of Candidate Clinton in 1992: healthcare reform, a middle-class tax cut, increased spending on hard capital and human capital—infrastructure and education. But that is not the path President Clinton ultimately followed. Along with congressional Republicans, he focused on balancing the budget, knocking down trade barriers, even signing a capital gains tax cut. Now I have talked to Obama economic advisers and they are signaling no intention to scrap his investment and tax agenda in order to focus on the budget deficit, $700 billion Paulson Plan or not. Obama himself is still talking it up in the debates, that's for sure. In fact, one Obama adviser told me the economy would have been better in the 1990s had Clinton focused on his "investment' campaign agenda rather than the "bond market strategy" that was more pleasing to Alan Greenspan.
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Wall Street to GOP: Drop Dead
Tweet Share on Facebook October 14, 2008 Comment (10)Might there be some huge political realignment going on? One sign of it is the growing disenchantment between Wall Street/Big Business and the GOP. From today's WSJ:
Sen. John McCain badly needs the cash infusion and momentum from a Tuesday night fund-raiser in New York. But the senator's recent demonizing of Wall Street made it tough to lure contributors, with Wall Street and corporate executives balancing their aggravation with the Republican presidential hopeful against their rising unease about his Democratic opponent. [On] Sept. 24, tensions heightened when Sen. McCain, who had come to New York for the United Nations session, met with key business supporters, including Cisco Systems' CEO John Chambers, retired E-Bay CEO Meg Whitman and private-equity guru Henry Kravis. The campaign invited these executives just the night before to show up at the Manhattan hotel for an emergency meeting. After the media left a photo op with the group, the financiers gave Sen. McCain an earful. Some of them warned him against getting personal and making Wall Street the scapegoat for the nation's troubles.
Me: So not only do you have the GOP nominee blasting Wall Street and losing the tax issue to his Democratic opponent, you have House Republicans as the key obstacle to the financial rescue plan. It's like what might have happened had Mike Huckabee gotten the nomination. The credit crisis, the $700 billion Paulson Plan, in particular—seems to have only accelerated a split that began with the go-go Clinton era, where you had a Democratic president who seemed pro-Wall Street both with his economic policies and cultural permissiveness. But can you be for the Investor Class and bash Wall Street at the same time? A hard push for lower cap gains rates and corporate tax, and a spirited defense of deregulation and free markets seem to be in the interest of both. But McCain has been doing little of that, many on the right say . And today's new economic plan is certainly a step in the wrong direction to many of those folks who see it as incrementalist.
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Stock Market Crash: How to Stop It
Tweet Share on Facebook October 10, 2008 Comment (7)As I write this, the stock market—already down nearly 40 percent for the year—is dropping like a rock made of concentrated fear. Some $3 trillion in stock market wealth is gone as institutions, and now individuals, continue to liquidate, liquidate, liquidate. How will it end? Hopefully like this, says superstrategist Ed Yardeni:
Of course, no one can tell how much longer or how much worse the panic selloff will be. The best case scenario is that the capitulation and revulsion phase of this extraordinary global bear market will climax today. Then on Sunday before the Asian markets open, the world's largest Sovereign Wealth Fund—the U.S. Treasury's TARP—will announce the names of 10-15 major financial institutions that will each receive $10 billion in capital, in exchange for equity stakes similar to those acquired by Warren Buffett from Goldman and GE. In my dream scenario, the Treasury temporarily guarantees all bank debt and the SEC suspends mark-to-market accounting on Sunday retroactively to June 1 of this year. Central banks announce that they have set up a facility to intermediate the interbank funding market. The three-month Libor plunges to 2.0% Monday morning. The money markets start to function again. The price of gasoline falls to $3.00 a gallon. Call me a dreamer.
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The End of American Capitalism? Please
Tweet Share on Facebook October 10, 2008 Comment (9)I was just on MSNBC, and the anchor asked whether all this turmoil marks the end of American capitalism. Pretty sure it doesn't. As I wrote the other day:
More evidence of the truth of this analogy comes from the World Economic Forum—the Davos people—who for the second straight year judged the United States as possessing the most competitive economy in the world. (Then came Switzerland, Denmark, Sweden, and Singapore.) Among America's strengths: innovation, flexible labor markets, and higher education. Not surprisingly, though, our institutions ranked a dismal 29th. (Thanks, Wall Street.)
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Nouriel Roubini: 8 Ways to Stop the Credit Crisis
Tweet Share on Facebook October 10, 2008 Comment (2)Economist Nouriel Roubini lays out what he thinks needs to be done right away to stop the escalating financial crisis.
1) another rapid round of policy rate cuts of the order of at least 150 basis points on average globally;
2) a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;
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52 Words That Explain the Financial Crisis
Tweet Share on Facebook October 10, 2008 Comment (16)Financial historian John Steele Gordon drops this 52-word bomb right at the end of his WSJ commentary today:
Congress's attempt to force banks to make home loans to people who had limited creditworthiness, while encouraging Fannie Mae and Freddie Mac to take these dubious loans off their hands so that the banks could make still more of them, created another crisis in the banking system that is now playing out.
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Credit Crisis to Greens: Drop Dead
Tweet Share on Facebook October 10, 2008 Comment (1)Stanford economist Nicholas Bloom finds the good news in the coming global recession:
In fact the only upside of all this is that the massive slow-down in economic growth will rapidly cut the growth rates of CO2 emissions. Pollution is tightly linked to the level of economic activity, so that a few years of negative growth would lead to reductions in pollution levels not seen since the 1970s. It seems ironic that the greed of Wall Street may have inadvertently achieved what millions of well intentioned scientists, activists and politicians have failed to achieve—a slowdown in global warming.
Me: It should also be pointed out that the economic slowdown has helped drain the energy, so to speak, from the global-warming issue. Now it's "drill, baby, drill." Measures that potentially limit economic growth aren't going to be too popular during a global economic slowdown. Fact is, polls show voters become more skeptical of government during tough economic times.
