Congress to Act If SEC Doesn’t

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One by one they are finally getting around to doing what they should have done long ago.

In my opinion, it’s all gotten ‘over the hump’ and the Obamaboom is underway with new fiscal measures adding fuel to the fire as they kick in.

Most recessions are inventory cycles of one kind or another.

Q2 08 was up 2.8% real when the Great Mike Masters Interplanetary Inventory Liquidation hit with a vengeance in July.
Supply from inventory liquidation took away demand for new production, triggering an unprecedented downward spiral in the real economy that brought the already stressed world financial sector/equity markets as well.

The automatic stabilizers of falling tax revenue and rising transfer payments increased the deficit to something over 5% of GDP annualized by year end.

This process directly adds nominal income and ‘savings’ of financial assets to the non govt sectors, until it reverses.

The inventory liquidation seemed to end in late December, as savings was reported to have leaped to over 5% of income (annualized) with the budget deficit doing much the same.

Personal income/spending turned up in January as Federal pay raises kicked in as well.

Core retail sales firmly up January and February- Q1 GDP estimates being revised up.

The unprecedented damage to the real economy and our standard of living could have been avoided by a proactive fiscal response soon after commodity prices broke and GDP forecasts were being revised down.

But that was not to happen.

Instead we got the fiscal response the ‘ugly way’ via falling revenues and rising transfer payments from the collapse in the real economy.

But now that process looks like it may have run its course, with the federal deficit (ex TARP which doesn’t count for this purpose- it’s just a shifting around of financial assets) annualizing at well over 5% of GDP for Q1 09.

And, as in previous cycles, the long delayed political response kicks in after the bottom and the Obamaboom begins!

Also, as previously discussed, there has been no action taken to reduce fuel consumption in the near term, so expect any demand to give the Saudis cover to raise prices to any level they want without ‘blame.’

And, with employment and wages improving only with a considerable lag, and the outsized support directed to banking and the financial sector, watch for the transfer of wealth to the upper income groups quickly surpass the extremes of the previous administration.

Kanjorski: Congress May Need To Act On Mark-to-market Rules

by Jesse Westbrook

Mar 12 (Bloomberg) — U.S. Representative Paul Kanjorski said Congress will revise an accounting measure that banks blame for exacerbating the financial crisis if regulators don’t act “quickly” to give companies more leeway in applying the rule.

“If the regulators and standard setters do not act now to improve the standards, then the Congress will have no other option,” Kanjorski, the Pennsylvania Democrat who leads a House financial services subcommittee, said at a hearing today. So- called mark-to-market accounting has “produced numerous unintended consequences.”