Category Archives: Obama

Obamaboom fiscal fitness update

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Leaning in the right direction to restore demand.

A decisive move from the new Obama team is very possible given the latest rhetoric.

FACTBOX-Fiscal stimulus plans to tackle the crisis

Nov 23 (Reuters) – Countries around the world are setting out fiscal stimulus packages to help their economies withstand the impact of the global financial crisis.

Below are some details:

* AUSTRALIA:

— The government has announced a A$10.4 billion ($6.8 billion) package of cash handouts and family benefits and has pledged more if it is needed.

— It is providing A$1.5 billion to boost the housing and home building markets and doubling the grant for first-time home buyers. They will now get A$14,000 from an original A$7,000.

* CHINA:

— Provincial government plans will add an additional 10 trillion yuan ($1.464 trillion) to a 4 trillion yuan stimulus package announced by the central government earlier this month, state television said. The central scheme included rail and infrastructure schemes as well as extra social spending to offset the sharp drop in demand for the exports which fuel China’s economy.

— China is also changing value added tax (VAT) to allow companies to deduct the cost of capital equipment, saving them about 120 billion yuan a year.

* EUROPEAN UNION

– An economic stimulus plan to be presented on Nov. 26 will include a significant budgetary expansion, the head of the EU executive said on Friday, as it signalled longer deadlines for countries to slash budget gaps.

— German Economy Minister Michael Glos has said the plan envisaged, among other things, a 1 percentage point cut in value-added tax across the EU and that the total value of the stimulus was 130 billion euros ($163 billion).

* GERMANY:

— The government has announced a package which will generate about 50 billion euros ($64.22 billion) in investment and contracts.

– A new lending programme of up to 15 billion euros will be introduced for German state-owned development bank Kreditanstalt fuer Wiederaufbau (KfW) to strengthen its lending activities. KfW’s infrastructure programme for structurally weak local authorities will be raised by 3 billion euros.

— Urgent investment in transport will be accelerated via a new programme totalling 1 billion euros in both 2009 and 2010.

— Parliament has approved a rise in government net new borrowing in 2009 to 18.5 billion euros from 10.5 billion.

* NETHERLANDS

— The government has announced a “liquidity impulse” of about 6 billion euros ($7.5 billion), including allowing companies to write down investments earlier than usual.

— Companies will also receive temporary financial support from an unemployment fund to pay employees who will cut down on their working hours.

*RUSSIA

— Prime Minister Vladimir Putin on Nov. 20 unveiled a $20 billion economic stimulus package and help for people hurt in the economic slowdown. He offered assurances there would be no repeat of the economic turmoil when the Soviet Union collapsed in 1991 and, 10 years ago, when the state defaulted on its debt.

— The package will include a cut in profit tax, which accounts for 8.5 percent of budget revenues, to 20 percent from 24 now, and a new depreciation mechanism that will allow firms to reduce the profit tax further.

— The government has already sanctioned state-run banks to support industry with billions of dollars of soft funding.

* SOUTH KOREA:

— The government has unveiled a package worth at least 14 trillion won ($9.37 billion), including tax cuts

— Measures also include an extension of 1.3 trillion won to state-owned banks to help SMEs. The government is to expand credit guarantees to SMEs by 6 trillion won.

* SPAIN:

— In the last six months, Spain announced various measures to cushion the impact of the economic slowdown and soaring unemployment including a 38 billion euro ($49.28 billion) fiscal stimulus package.

— The package includes 6 billion euros in tax cuts and 4 billion euros of liquidity to credit strapped companies and households.

— It also includes a 400-euro income tax rebate for employees, pensioners and the self-employed.

* SWITZERLAND:

— The government announced an economic stimulus package worth 890 million Swiss francs ($753 million). It includes government spending of 340 million francs on flood defence, natural disasters and energy efficiency projects.

— Spending plans also include up to 1 billion francs on roads and railways and 550 million francs as tax breaks to 650 firms for job creation programmes.

* TAIWAN:

— Taiwan has announced T$122.6 billion worth of subsidies and tax cuts and T$58.3 billion of infrastructure spending. The steps unveiled are expected to generate T$1 trillion ($31.2 billion) in investment and consumption.

* UNITED KINGDOM:

— The government is expected to announce on Monday a package of tax cuts and extra public spending of upto 20 billion pounds ($29.70 billion), with the centrepiece a temporary cut in sales tax.

— The packagesis also expected to feature tax relief for small firms, efficiency savings and help for mortgage payers.

— British Prime Minister Gordon Brown said on Nov. 11 he was ready to borrow to provide the British economy a fiscal boost and he urged other countries to do the same.

* UNITED STATES:

— President-elect Barack Obama said he is crafting a two-year plan to revive the economy and save or create 2.5 million jobs. He called in October for a $175 billion stimulus measure but appears ready to for a much larger package. — Congressional Democrats have promised to make a broad economic stimulus a priority when they reconvene in January. The package is expected to include middle-class tax cuts and billions of dollars for public works projects, such as the construction of roads, bridges and mass transit. OTE]))

— President George W. Bush signed a $168 billion, two-year economic stimulus package into law in early 2008. Of that total, $152 billion was earmarked for 2008.

— The package includes tax rebates of up to $600 per individual earning $75,000 in adjusted gross income or less and $1,200 per couple plus $300 per child. Businesses would be able to deduct half the costs of purchases of new equipment. (Editing by David Cowell; +44 207 542 6486)


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ObamaBOOM around the corner?

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Obama says drafting bold economic stimulus

U.S. President-elect Barack Obama said Saturday that he was crafting an aggressive two-year stimulus plan to revive the troubled economy, warning that swift action was needed to prevent a deep slump and a spiral of falling prices.

Agreed!

“If we don’t act swiftly and boldly, most experts now believe that we could lose millions of jobs next year,” the Democratic president-elect said in a weekly radio address.

Agreed!

Obama, who succeeds President George W. Bush on Jan. 20, said the economy could get worse before it gets better. “We now risk falling into a deflationary spiral that could increase our massive debt even further,” he said.

Obama said the plan would aim to save or create 2.5 million jobs by January 2011 and would be “big enough to meet the challenges we face.” Any additional jobs would offset what is expected to be a dismal employment picture in the near future.

I vote for ‘create’ and await clarity of what he means ‘boldly’.


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Re: Obama’s pick for OMB

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(email exchange)

Hope Obama doesn’t listen to any of that stuff!

>   
>   On Wed, Nov 19, 2008 at 5:42 PM, Scott wrote:
>   
>   Obama picks Orszag, who has written on the dangers of rising deficits
>   for interest rates, and on the government’s fiscal “gap” into the infinite
>   horizon, to head OMB.
>   
>   ”Peter Orszag, the head of the Congressional Budget Office, was picked
>   to head Obama’s Office of Management and Budget, a top Democratic
>   source told CNN on Tuesday. Orszag worked at the Clinton White
>   House as special assistant to the president at the National Economic
>   Council and served on the Council of Economic Advisers.”
>   


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Obama plans will revive the economy

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Obama Says He Will Do `Whatever It Takes’ on Economy

By Edwin Chen

Nov. 17 (Bloomberg) President-elect Barack Obama said the U.S. government will do “whatever it takes” to revive the economy, and that means “we shouldn’t worry about the deficit next year or even the year after.”

In the short term, “the most important thing is that we avoid a deepening recession,” Obama said in an interview broadcast last evening on CBS News’s “60 Minutes.”


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Obama’s big bang on the way

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No doubt current international fiscal plans can restore some measure of growth and employment.

They may even be sufficient to stabilize the eurozone via exports (if the eurozone can make it from here to there).

Not so clear is whether fuel consumption will be cut sufficiently to avoid a resumption of continuous price hikes and declining real terms of trade:

Obama set to push ‘big bang’ reform package

By Edward Luce

US President-elect Barack Obama intends to push a comprehensive programme of social and economic reform beyond an immediate emergency stimulus package, Rahm Emanuel, the next White House chief of staff, indicated on Sunday.

Mr Emanuel brushed aside concerns that an Obama administration would risk taking on too much when it takes office in January. He said Mr Obama saw the financial meltdown as an historic opportunity to deliver the large-scale investments that Democrats had promised for years.

Tackling the meltdown would not entail delays in plans for far-reaching energy, healthcare and education reforms when all three were also in crisis, he said. “These are crises you can no longer afford to postpone [addressing].”


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Econ transition team

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Looks like payback for political help, not ‘change’:

Members of the Transition Economic Advisory Board:

  • David Bonior (Democratic member of the House of Representatives, 1977-2003)
  • Warren Buffett (chairman and CEO, Berkshire Hathaway)
  • Roel Campos (former commissioner at the Securities and Exchange Commission)
  • William Daley (chairman of the Midwest, JPMorgan Chase; former secretary, U.S. Dept of Commerce, 1997-2000)
  • William Donaldson (former chairman of the SEC, 2003-2005)
  • Roger Ferguson (president and CEO, TIAA-CREF and former vice chairman of the Board of Governors of the Federal Reserve)
  • Jennifer Granholm (governor, state of Michigan)
  • Anne Mulcahy (chairman and CEO, Xerox)
  • Richard Parsons (chairman of the board, Time Warner)
  • Penny Pritzker (CEO, Classic Residence by Hyatt)
  • Robert Reich (professor, Goldman School of Public Policy, University of California, Berkeley; former secretary, U.S. Dept of Labor, 1993-1997)
  • Robert Rubin (chairman and director of the executive committee, Citigroup; former secretary, U.S. Department of Treasury, 1995-1999)
  • Eric Schmidt (chairman and CEO, Google)
  • Lawrence Summers (managing director, D.E. Shaw; former president of Harvard University; former secretary, U.S. Department of Treasury, 1999-2001)
  • Laura Tyson (professor, Haas School of Business, University of California, Berkeley; former chairwoman, National Economic Council, 1995-1996; former chairwoman, President’s Council of Economic Advisors, 1993-1995)
  • Antonio Villaraigosa (mayor, city of Los Angeles)
  • Paul Volcker (former chairman, U.S. Federal Reserve 1979-1987)


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Initial recommendations for President Obama

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Initial recommendations for President Obama:

  • Offer a $10 per hour national service job to anyone willing and able to work.
  • Declare a payroll tax holiday and have the Treasury make all FICA payments at least until the economy is deemed to be ‘overheating.’
  • Cut the national speed limit for private ground transportation to 30 mph to immediately reduce gasoline consumption (and save lives).
  • Implement needed infrastructure spending for deferred maintenance.
  • Suspend the Fed swap line program.
  • Suspend a variety of the recent, counterproductive assistance programs to the financial sector.


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Re: Obama’s Yuan Calls- NOT GOOD

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>   
>   On Thu, Nov 6, 2008 at 7:09 AM, Michael wrote:
>   

Obama’s Yuan Calls May Put U.S. on Collision Course With China

by Judy Chen

Nov. 6 (Bloomberg) — Barack Obama’s calls for changes in China’s yuan policy may put the president-elect on a collision course with the U.S.’s second-largest trade partner, which is holding the currency stable to support its export-led economy.

Obama said China must stop manipulating the currency in a letter to the National Council of Textile Organizations released on Oct. 24.

This is counter productive for the US standard of living.

Obama has yet to discover imports are real benefits and exports real costs.

The People’s Bank of China has kept the yuan almost unchanged against the dollar since mid-July as it shifts focus from countering inflation to sustaining growth amid a global credit crisis. The Foreign Ministry said last week the U.S. shouldn’t blame its trade deficit on exchange rates.

“Obama may exert more pressure on China’s foreign-exchange policy to boost U.S. exports and curb unemployment, but China will first consider its own economic fundamentals,” said Ha Jiming, Hong Kong-based chief economist at China International Capital Corp., the nation’s first Sino-foreign investment bank.

Hopefully, Obama will see the light and it will instead be a case of ‘when the facts change I change’.

Policy of Stability
Paulson said on Oct. 21 that he is “pleased” that China’s currency has appreciated more than 20 percent since a peg against the dollar was abandoned in July 2005.

Paulson either has it backwards, or he’s being subversive.

“It will be emphasized in the next Strategic Economic Dialogue that it is more important than ever that China should rely more on domestic demand rather than its trade surplus to sustain economic growth,” said Nicholas Lardy, senior fellow at the Peterson Institute for International Economics in Washington.

Same- ignorant or subversive are the only possibilities.

“Currency manipulation has been a quite specific implication in law, and no other president has ever used that term,” said Straszheim. If Obama doesn’t take actions following the charge that China is manipulating the yuan, “he will be regarded as another old type politician who promises one thing during the campaign and does another in office,” he added.


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Fed to lend to CBs in unlimited quantities (day 2)

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I’m keeping an eye on crude prices rising a lot more than the USD is falling; so, I suspect the great Mike Masters inventory liquidation has run its course.

Inventories are at record or near record lows.

If there has been net demand destruction, it hasn’t yet showed up in OPEC or Saudi production numbers.

The Saudis only pump on demand, at their price, so as swing producer it’s their production that should fall, not anyone else’s.

However, there can be 90 day type lags; so, October Saudi production could be down but not be reported until early November.

___________________________________________________________________________________________________________________

This latest swap line expansion should be a target of Obama and McCain, but neither are touching it.

It’s a financial blunder, potentially of epic magnitudes.

It’s also an oversight issue of epic magnitudes that could dwarf the subprime issue at the first ECB USD auction tomorrow.

The $620 billion swap lines currently in place could swell to well over a trillion USDs.

It will reduce eurobanks cost of USD funds, bring down LIBOR, and normalize bank liquidity.

And the reduction of bank credit risk is bringing in credit spreads which makes room for equities to appreciate as well.

But that’s an empty victory that changes the lack of aggregate demand very little, if any.

And it adds a new element of systemic risk.

Unrestricted/’currency secured’ international USD lending has been tried before in the emerging markets.

Yes, this type of initial lending reduces financial stress, but then it must be sustained and increased to avoid a subsequent collapse, which then becomes inevitable.

Remember Mexico and the rest of Latin America?

It took a growing level of external USD debt to hold it together, until the number got too large and the controls impossible. And then it all fell apart.

All of these ‘top down’ measures that carry the hopes and anticipations of markets should continue to be let downs as no one addresses demand.

This happened in Japan after the banks were recapitalized and ‘healthy’ and nothing happened regarding lending.

Obama and McCain have a window to jump on this opening but don’t seem to be. McCain as the watchdog and Obama as the reformer are both letting us down. Again, as they show no insight and instead keep to their canned rhetoric.

Bush and congress missed a historic opportunity to move the US away from ‘materialism’ after 9/11.

I got a call from Congressman Gephart at the time, and I said this is an opening to show a different kind of leadership as people had turned ‘inward,’ with the following type of statement:

A nation is not richer because people sleep in hotels instead of staying at home. A nation is not richer because we eat out rather than have family meals at home. And now that we have become more introspective on life itself, we can continue this enlightened change of course, back to our real core values, and steer our efforts to educating our children and improving our health care service, etc. etc.

But instead, our leadership telling us:

“Get out of Church and get into the shopping malls!” in order to ‘save the economy’, etc. etc. Gephart didn’t do it. And we went back to the malls.

This go round was also an opportunity to make a fundamental change away from a lending based model to a more cash based model which seems to me has proven more stable over time and a lot more beneficial to human peace of mind.

We could have let most of our lending institutions go by the wayside and kept the banks that would be allowed to make more conservative home loans, installment loans, checking and savings accounts, and not much else. And the housing agencies operating a bit like the old savings and loan’s used to do, but this time with sustainable, matched treasury funding.

And rather than relying on lending for aggregate demand, which is inherently unstable, we could have supported aggregate demand with a fiscal package to provide sufficient income to buy our output and sustain growth and employment.

But instead we are first ‘fixing’ the lending institutional structure, without addressing aggregate demand.

It’s unlikely that costly (in terms of lost output and employment) credit bubbles will be reduced by first supporting the lending institutions and then supporting demand.


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Statement of Senator Obama on moving financial legislation forward

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Statement of Senator Obama on Moving Financial Legislation Forward


Yesterday, within the course of a few hours, the failure to pass the economic rescue plan in Washington led to the single largest decline of the stock market in two decades.

Might have been worse if they had passed the plan!!!

While I, like others, am outraged that the reign of irresponsibility on Wall Street and in Washington has created the current crisis,

All a result of institutional structure that put the incentives in place in place to do what was done.

Including the way Washington works.

I also know that continued inaction in the face of the gathering storm in our financial markets would be catastrophic for our economy and our families.

At this moment, when the jobs, retirement savings, and economic security of all Americans hang in the balance, it is imperative that all of us – Democrats and Republicans alike – come together to meet this crisis.

The bill rejected yesterday was a marked improvement over the original blank check proposed by the Bush Administration. It included restraints on CEO pay, protections for homeowners, strict oversight as to how the money is spent, and an assurance that taxpayers will recover their money
once the economy recovers.

None of that matters for the ‘success’ of the plan which is doubtful, as it’s not much more than an asset swap, and with the changes, the additions of incentives for CEOs not to participate.

Given the progress we have made, I believe we are unlikely to succeed if we start from scratch or reopen negotiations about the core elements of the agreement. But in order to pass this plan, we must do more.

One step we could take to potentially broaden support for the legislation and shore up our economy would be to expand federal deposit insurance for families and small businesses across America who have invested their money in our banks.

The majority of American families should rest assured that the deposits they have in our banks are safe. Thanks to measures put in place during the Great Depression, deposits of up to $100,000 are guaranteed by the federal government.

While that guarantee is more than adequate for most families, it is insufficient for many small businesses that maintain bank accounts to meet their payroll, buy their supplies, and invest in expanding and creating jobs. The current insurance limit of $100,000 was set 28 years ago and has not been adjusted for inflation.

That is why today, I am proposing that we also raise the FDIC limit to $250,000 as part of the economic rescue package – a step that would boost small businesses, make our banking system more secure, and help restore public confidence in our financial system.

Misses the point. Moving to $250,000 does nothing for the banking system. The cap needs to be removed, and the Fed given the mandate to lend unsecured to member banks in unlimited quantities.

Institutionally, this can be facilitated by extending FDIC insurance to Fed deposits at member banks.

That way, any ultimate bank insolvencies and losses continue to be charged to the FDIC.

I will be talking to leaders and members of Congress later today to offer this idea and urge them to act without delay to pass a rescue plan,” said Barack Obama.

A baby step in the right direction.

Not enough to make a difference.

Doesn’t address the issue of aggregate demand and homeowner’s ability to pay as employment stagnates.


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