Capital Commerce


December 2008


Take Off the TARP

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Wise words Chris Edwards at Cato:

Will Congress approve the second $350 billion of TARP money? I have no special skill at political speculation, but since a reporter asked, here are five reasons I think that it won’t, thankfully.

  1. It is not clear that the first $350 billion of TARP ...

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6 Reasons for 2009 Optimism

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A bit of cheer from Jim Glassman over at JPMorgan Chase:

The forecast of an economic revival beginning in 2009 is based on six themes. First, the Federal Reserve is flooring the monetary gas pedal and using its balance sheet to counterbalance otherwise life-threatening credit restrictions ...

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Slowing Down the Obama Stimulus Plan

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Congressional Dems are worried they won't be able to rush through Obama's massive spending stimulus plan as fast as they would like (via the WSJ):

Democratic leaders are increasingly concerned that they won't be able to offer an economic stimulus package for congressional debate until late ...

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More Housing Gloom

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Ouch. The peak-to-trough decline in the Case Shiller 10-city index is 25 percent. The 20-city index is down 23 percent. And my guy Mike Darda doesn't seen any light at the end of the housing tunnel:

While housing affordability has turned up, housing inventories are still in the ...

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What Liberals Want Obamanomics to Be

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The economic wishes and dreams of Jeff Madrick in The Nation:

1) Raise the minimum wage still higher and on a regular basis. It has fallen far behind increases in inflation since the 1970s, and that affects higher level wages as well.

2) Encourage living-wage programs by local ...

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Stocks First, Economy Second

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From Wesbury and Stein of First Trust Advisers:

History shows that the stock market tends to bottom before recessions end. The stock market bottomed in August 1982, and was up 26% before the recovery began in November 1982. And in 1974, the stock market bottomed in December, and was up more ...

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Help Factory Workers, Smash Machines

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The Congressional Budget Office released a study last week on employment in the manufacturing sector of the economy this decade. It's down, but blame the machines as much as Asia. I put the good bits in bold:

Although the decline in manufacturing employment in recent years is not a departure from ...

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Paul Krugman: Nationalize Education

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In today's NYTimes, Paul Krugman does accurately identify a growing problem, that of governors raising taxes (usually) and cutting spending (less so) to deal with budget shortfalls. "50 Herbert Hoovers" is how the headline describes the situation. But toward the end, he offers that Uncle Sam ...

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Obama's Totally Political Economic Stimulus

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The depressing reality of the trillion-dollar Obama economic stimulus -- I mean, economic "recovery" -- plan is slowly emerging. It seems more about about liberal politics and liberal economic agendas than reigniting the American economy. Sorry. More evidence comes in this WaPo story. Here is the ...

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How Democrats are Like Jack Bauer

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Don't believe for a second that Democrats, at least those up for reelection in 2010, are counting on the public to give them a free pass on the economy. Here is Rep. Jerry Nadler of New York:

Elections are run in two-year cycles, and we're in an economic cycle that we can't turn around in ...

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Get Ready for the Housing Bailout

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News like today's terrible housing report makes me ever more sure a federal housing bailout is on its way. Here is what IHS Global Insight has to say about the day's news:

The November home sales report illustrates the ultimate risk in a situation where negative business cycle momentum ...

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Save the Stock Market, Save the World

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Paul Krugman makes this point today in the NYT:

To be more specific: the severe housing slump we’re experiencing now will end eventually, but the immense Bush-era housing boom won’t be repeated. Consumers will eventually regain some of their confidence, but they won’t spend the way they did ...

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5 Reasons to be Bullish on the Economy

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Brian Wesbury and Bob Stein give us reasons to feel good about the economy:

1) Between 1965 and 1982, the US economy was in recession one out of every three years, inflation hit double digits and the unemployment rate peaked at 10.8%. Since 1982, the US has been in recession just one out ...

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Dude, Where's My Depression?

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Mike Darda notes that the frozen credit markets are pinking up, if only just a bit:

The TED spread has dropped to 148 bps versus 186 a week ago and 217 bps two weeks ago. Similarly, the two-year swap spread has dropped to 79 bps versus 103 bps a week ago and 117 bps two weeks ago. Discount ...

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Washington's War on Silicon Valley

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A must-read op-ed in the WSJ today:

For more than 30 years the entrepreneurship-venture capital-IPO cycle centered in Silicon Valley has generated new wealth, commercialized innovation, and created new companies and industries. It's also spun off millions of new jobs. ... It has ...

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Headlines from the Future!

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Obama Environmental Czar Resigns

By Vic Sage | May 1, 2010 | USNews.com

(Washington, D.C.) -- White House environmental "czar" Carol Browner announced her resignation today, citing a desire to "spend more time with her family." But multiple sources within the Obama administration say Browner had ...

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Stimulus Skeptics

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Andrew Samwick on the stimulus:

Is some degree of skepticism justified?  Of course.  There have been only vague references to what is a priority and what is not.  In that environment, money is likely to be wasted.  The Congress, and particularly the Congressional leadership, needs to step ...

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Toyota vs. The Big Three

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Somehow when Toyota's CEO says things like the following, I tend to believe him more than Detroit's guys: "We must change to become more slim, muscular and flexible." That was Katsuaki Watanabe on the company's first-ever operating loss.

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Democrats and the Housing Crisis

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I have to admit, the White House makes a good point in its rebuttal to the NY Times story about President Bush's role in the housing meltdown:

The story also gives kid glove treatment to Congress. While the administration was pushing for more transparent lending rules and strengthening ...

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Bush Big 3 Bailout: Nope, It's Bad

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This IHS Global Insight analysis tell me all I need to know about President Bush's automaker bailout. You know those tough changes and goals that the UAW will have to meet? Turns out, not so much :

These targets are nonbinding however, and may be adjusted if the automakers can demonstrate a ...

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Bush Big 3 Bailout: Maybe Not So Bad

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It now looks like that to get that $17.4 billion, big changes will need to be made (via the NYTimes):

The loan deal requires the companies to quickly reduce their debt by two-thirds, mostly through debt-for-equity swaps, and to reach an agreement with the United Auto Workers union to cut ...

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Obama Unbound!

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Irwin Stelzer in the Weekly Standard lays it out for us:

Obama sees himself as a transformational figure. The government already has effective control of the banking and mortgage markets. Obama has appointed Tom Daschle to organize a step-by-step takeover of the health-care sector. Carol ...

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Bush's $17.4 billion Automaker Bailout? Not Good.

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OK, so the White House has apparently come to the momentary rescue of the U.S. auto industry by offering $17.4 billion in loans in exchange for concessions similar to what was in the House bill. So no sweeping wage or benefit or work rule cuts. That will be left to the Obama car czar who'll likely ...

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Obama's Wasteful Stimulus Plan

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$850 billion (with a bullet) for what, exactly? Alice Rivlin, a budget director under Bill Clinton, speaks truth to power, courtesy of the WaPo:

Rivlin said she would prefer quick approval of a much smaller [stimulus] package that contains only items that would rapidly push cash into the ...

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Kudlow: More Mustard Seeds

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Larry Kudlow explains it all:

But if we really want to jolt the economy, there’s a tried and true way to do it. Lower marginal tax rates across-the-board for individuals and businesses. Labor and capital costs will be reduced, risk taking and success will be rewarded, and investment will flow back ...

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CNBC Erin Burnett's Interesting Thought

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I appeared yesterday morning on CNBC's Squawk on the Street with Erin Burnett, along with John Hilsenrath of the WSJ. Erin raised a real interesting point: With Ben Bernanke and the Fed going "all in" to bail out the economy, do we really need Obama's Amazing Fantastic Stimulating Stimulus? A few ...

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Explaining the Dollar

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Superstrategist Andy Busch of BMO Capital Markets enlightens as to the big drop in the greenback:

The greenback has been brutalized since November 21st and remains under attack. The reason I bring up the 21st is that is the day we had a low put in for the Dow and then we had a higher close ...

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Bernanke's Gone Nuclear, But Will Obama?

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The econpundits are telling us Ben Bernanke has "gone nuclear" in his efforts to stave off a mini-depression. Economist Mike Feroli puts the Fed's actions in this context:

At last year's December meeting rates were cut to 4.25% and no bias of risks was given by the committee.  In the twelve ...

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Housing Market Implosion Continues

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It only gets worse. From IHS Global Insight:

1) Housing starts plummeted 18.9% in November, to a seasonally adjusted annual rate (SAAR) of 625,000 units.

2) Data revisions lowered October's estimate by 20,000 to 771,000.

3) Single-family starts dropped 16.9%, to a record low 441,000 ...

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Dr. Ed's Insight of the Day

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Ed Yardeni opines thusly on 2008:

This year was a Black Swan for sure if you happened to work on Wall Street, particularly Bear Stearns and Lehman. It’s been bleak for many homeowners who have lost or are losing their homes. Investors in corporate bonds and stocks have been hit with huge ...

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The Endgame for the Big Three

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I think Richard Posner lays out a pretty realistic scenario about where Detroit is heading

I doubt that anyone in Congress or in either the outgoing or the incoming Administration really thinks that a bailout bill will place the domestic industry on the path to salvation. The conditions ...

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Economy Reality Check

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Brian Wesbury and Bob Stein tells the depressionistas to simmer! As the two economists put it:

Many observers are pessimistic about the economy because they believe a vicious downward cycle has taken hold, where less spending leads to fewer jobs, which reduces purchasing power, leading to ...

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Obama the All-Seeing, Obama the All-Knowing

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Obama announced his energy and environmental team yesterday. These remarks sort of irked me:

We can spark the dynamism of our economy through a long-term investment in renewable energy that will give life to new businesses and industries with good jobs that pay well and can't be outsourced.

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Obama's Double Recession Risk

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Economist Victor Canto lays out a double-dip recession scenario

The fiscal case for the double dip is much easier to make. If the economy recovers, Presidentelect Obama will not be bound by the statement that you don’t raise taxes in a recession. All he has to do is allow the Bush tax rate ...

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Unions in Action

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My favorite paragraph from today's WaPo story about the success of charter schools in DC: "Many charter directors said success, especially with poor children, depends on creating a cohesive and uniform environment. Without unions and seniority rules, they can decide who to hire and fire. They try ...

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Dr. Ed's Insight of the Day

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From the great Ed Yardeni:

 The “Great Unwinding” of the private sector has been offset by the “Great Winding” of the government. ... While the debt-to-GDP ratio for the private sector is bound to decline, this ratio for the government is already rising sharply. Borrowing of the private ...

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Gregory Mankiw: My Tax Cut Idea

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A tax-cut two step from Greg Mankiw:

How about an immediate and permanent reduction in the payroll tax, financed by a gradual, permanent, and substantial increase in the gasoline tax? Make the two tax changes equal in present value, so while the package results in a short-run budget deficit, there ...

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