Krauthammer on Obama


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Thanks, the press is starting to turn.

Hope for the best, prepare for the worst.

The Fierce Urgency of Pork

by Charles Krauthammer

Feb 6 (Washington Post) — “A failure to act, and act now, will turn crisis into a catastrophe.”

— President Obama, Feb. 4.

Catastrophe, mind you. So much for the president who in his inaugural address two weeks earlier declared “we have chosen hope over fear.” Until, that is, you need fear to pass a bill.

And so much for the promise to banish the money changers and influence peddlers from the temple. An ostentatious executive order banning lobbyists was immediately followed by the nomination of at least a dozen current or former lobbyists to high position. Followed by a Treasury secretary who allegedly couldn’t understand the payroll tax provisions in his 1040. Followed by Tom Daschle, who had to fall on his sword according to the new Washington rule that no Cabinet can have more than one tax delinquent.

The Daschle affair was more serious because his offense involved more than taxes. As Michael Kinsley once observed, in Washington the real scandal isn’t what’s illegal, but what’s legal. Not paying taxes is one thing. But what made this case intolerable was the perfectly legal dealings that amassed Daschle $5.2 million in just two years.

He’d been getting $1 million per year from a law firm. But he’s not a lawyer, nor a registered lobbyist. You don’t get paid this kind of money to instruct partners on the Senate markup process. You get it for picking up the phone and peddling influence.

At least Tim Geithner, the tax-challenged Treasury secretary, had been working for years as a humble international civil servant earning non-stratospheric wages. Daschle, who had made another cool million a year (plus chauffeur and Caddy) for unspecified services to a pal’s private equity firm, represented everything Obama said he’d come to Washington to upend.

And yet more damaging to Obama’s image than all the hypocrisies in the appointment process is his signature bill: the stimulus package. He inexplicably delegated the writing to Nancy Pelosi and the barons of the House. The product, which inevitably carries Obama’s name, was not just bad, not just flawed, but a legislative abomination.

It’s not just pages and pages of special-interest tax breaks, giveaways and protections, one of which would set off a ruinous Smoot-Hawley trade war. It’s not just the waste, such as the $88.6 million for new construction for Milwaukee Public Schools, which, reports the Milwaukee Journal Sentinel, have shrinking enrollment, 15 vacant schools and, quite logically, no plans for new construction.

It’s the essential fraud of rushing through a bill in which the normal rules (committee hearings, finding revenue to pay for the programs) are suspended on the grounds that a national emergency requires an immediate job-creating stimulus — and then throwing into it hundreds of billions that have nothing to do with stimulus, that Congress’s own budget office says won’t be spent until 2011 and beyond, and that are little more than the back-scratching, special-interest, lobby-driven parochialism that Obama came to Washington to abolish. He said.

Not just to abolish but to create something new — a new politics where the moneyed pork-barreling and corrupt logrolling of the past would give way to a bottom-up, grass-roots participatory democracy. That is what made Obama so dazzling and new. Turns out the “fierce urgency of now” includes $150 million for livestock (and honeybee and farm-raised fish) insurance.

The Age of Obama begins with perhaps the greatest frenzy of old-politics influence peddling ever seen in Washington. By the time the stimulus bill reached the Senate, reports the Wall Street Journal, pharmaceutical and high-tech companies were lobbying furiously for a new plan to repatriate overseas profits that would yield major tax savings. California wine growers and Florida citrus producers were fighting to change a single phrase in one provision. Substituting “planted” for “ready to market” would mean a windfall garnered from a new “bonus depreciation” incentive.

After Obama’s miraculous 2008 presidential campaign, it was clear that at some point the magical mystery tour would have to end. The nation would rub its eyes and begin to emerge from its reverie. The hallucinatory Obama would give way to the mere mortal. The great ethical transformations promised would be seen as a fairy tale that all presidents tell — and that this president told better than anyone.

I thought the awakening would take six months. It took two and a half weeks.


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IMF statement


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“Ten days ago, the IMF cut its world-growth estimate for this year to 0.5 percent, the weakest pace since World War II. Stimulus packages alone won’t succeed in dragging the global economy out of recession unless confidence is restored in the banking system, Strauss-Kahn said today.”

I do not agree.

An ongoing fiscal adjustment alone can easily do the trick.

The banking system is functioning well enough (clearing checks and making only the loans it feels are attractive on a risk adjusted basis) to support a full blown economic boom should the government get the fiscal right.

>   
>   Warren:
>   
>   Have you seen this analysis by the IMF. Tell me that they are clueless. My
>   analysis is that they may be on the money.
>   

IMF Says Advanced Economies Already in Depression

by Angus Whitley and Shamim Adam

Feb 7 (Bloomberg)


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Peggy Noonan quote


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Yes, thanks!

>   
>   W: Here is a quote of Peggy Noonan whose WSJ columns I frequently read. I
>   think she sums up the two parties’ basic positions succinctly. Nowhere does
>   she recognize the reality of Federal spending driving the whole economy. She
>   still sees the US Treasury as a kind of piggy bank that has to be full before
>   you can draw on it for any purpose.
>   
>   ”The national conversation on the economy is frozen, and has been for a
>   while. Republicans say tax cuts, tax cuts, tax cuts. Democrats say spend, new
>   programs, more money. You can’t spend enough for the Democratic base, or
>   cut taxes enough for the Republican. But in a time when all the grown-ups of
>   America know spending is going to bankrupt us and tax cuts without spending
>   cuts is more of the medicine that’s killing us, the same old arguments, which
>   sound less like arguments than compulsive tics, only add to the public sense
>   that no one is in charge.”
>   
>   Uncle D.
>   


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OPEC January Crude Output Down 1,050,000 Bbl/Day to 28.565 Mln


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OPEC January Crude Output Down 1,050,000 Bdl/Day to 28.565M

Feb 3 (Bloomberg) — Crude-oil production from the 12 OPEC members in January declined 1,050,000 barrels a day from December, the latest Bloomberg survey of producers, oil companies and industry analysts shows. Figures are in the thousands of barrels a day.

Opec Production
January 2009

Opec Country Jan Est. Dec. Monthly Output Jan. 1 Change Est. vs. Target* Est. Target Est. Cap. (@)
Algeria 1,275 1,330 -55 1,202 72 1,450
Angola 1,740 1,820 -80 1,517 223 2,000
Ecuador 475 500 -25 434 41 500
Indonesia*
Iran 3,800 3,850 -50 3,336 464 4,100
Iraq* 2,365 2,345 20 2,500
Kuwait# 2,280 2,350r -70 2,222 58 2,650
Libya 1,630 1,660r -30 1,469 161 1,800
Nigeria 1,810 1,900 -90 1,673 137 2,500
Qatar 725 790 -65 731 -6 900
Saudi Arabia# 8,025 8,400 -375 8,051 -26 10,800
U.A.E 2,290 2,350 -60 2,223 67 2,800
Venezuela 2,150 2,320 -170 1,986 164 2,500
Total OPEC-12 28,565 29,615r -1050 34,500
Total OPEC-11* 26,200 27,270r -1070 24,845 1,355 32,000

*Quotas effective Jan. 1, 2009. OPEC agreed at its Dec. 17 meeting in Algeria to cut its quota target by 2.463 million barrels a day from the previous level, to 24.845 million barrels daily from Jan. 1. The quota target excludes Iraq, which has no formal quota, and Indonesia which left OPEC at end-2008.

Totals rounded.
r = revised @ = Capacity attainable within 30 days and sustainable for 90 days.
# Includes Neutral Zone production shared equally between Saudi Arabia & Kuwait.


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Re: deficit spending adds to savings


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(email exchange)

Think of it this way.

  1. Treasury spends $1 trillion by making deposits to bank accounts at the Fed. The spending adds $1 trillion of income and $1 trillion of new balances (not new balance shoes) that in the first instance are excess reserves at the fed.
  2. Treasury offers treasury securities for sale at auction. The purchase of those securities reduces the new, excess balances at the Fed, and replaces them with treasury securities, which are in fact nothing more than different accounts at the Fed. So operationally the Fed debits bank accounts on its books and credits securities accounts on its books.
  3. Again, the result is $1 trillion of new income and $1 trillion of new treasury securities held by the non government sectors.

Deficit spending adds exactly that much to our savings. The idea that ‘it has to come from somewhere’ and ‘borrowing removes savings’ are inapplicable with non convertibility currency/ floating FX policy.

If you count the new treasury securities as ‘money supply’ then it adds to money supply. If you don’t it doesn’t. Government spending is counted as GDP.

>   
>   On Feb 6, wrote:
>   
>   Question- Treasury needs to raise a trillion dollars to fund shortfall- so they
>   sell a trillion dollars of treasuries which Fed reserve bank buys and puts on its
>   balance sheet- what is the effect on economy? Money supply?
>   


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3 blind mice- nonsense from the BOJ, MOF, and Prime Minister


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Running with tails cut off with a carving knife:

This is what you get when the head of the CB doesn’t understand monetary operations and reserves accounting:

Shirakawa Says BOJ to Limit Asset Buying to Save Balance Sheet

by Jason Clenfield and Toru Fujioka

Feb 5 (Bloomberg) — Bank of Japan Governor Masaaki Shirakawa said the central bank will limit its purchases of stocks and corporate debt to protect its balance sheet and the credibility of the yen.

“We are mindful of the need to eventually end the purchases” as they are “extraordinary measures,” Shirakawa told lawmakers in Tokyo today. Excessive buying would worsen the central bank’s balance sheet and “have a clear impact on the yen’s credibility,” he said.

This what you get when the Finance Minister, Deputy Party Chairman, and former Finance Minister don’t understand monetary operations and reserve accounting:

Nakagawa Says Japan Isn’t Considering Printing Money

by Keiko Ujikane

Feb 6 (Bloomberg) — Japan’s government isn’t considering printing new money, Finance Minister Shoichi Nakagawa said.

He was responding to a report in the Financial Times that ruling party lawmakers would today propose printing 50 trillion yen ($549 billion) of a new currency to be used to pay for stimulating the economy.

“The idea of the government printing money isn’t in my mind,” Nakagawa said at a press briefing in Tokyo today.

“Japan’s economy is worsening rapidly so some people are discussing various ways of financing business activities and daily life.”

Yoshihide Suga, deputy chairman of the ruling Liberal Democratic Party election strategy council, is among the group of politicians that will suggest using 30 trillion yen of the money on projects such as doubling the size of Tokyo’s Haneda airport, the Financial Times reported. The other 20 trillion yen would be for government purchases of stocks and real estate.

Bank of Japan Governor Masaaki Shirakawa said Feb. 3 such a plan would hurt the credibility of the yen and lead to an increase in long-term yields by raising concern about the government’s ability to pay back the debt.

Former Finance Minister Bunmei Ibuki, speaking at a meeting of ruling LDP factions, said currency printed by the government rather than the Bank of Japan would devalue the yen and invite inflation, according to the Yomiuri Newspaper.

Discussions about the printing the money weren’t in the public interest, Ibuki said.

This is what you get when the Prime Minister doesn’t understand monetary operations or reserve accounting:

Japan May Consider 50 Trillion Yen in Scrip, FT Says

by Dave McCombs

Feb 6 (Bloomberg) — An aide to Japan’s Prime Minister Taro Aso and some lawmakers will today propose printing 50 trillion yen ($549 billion) worth of a new currency to be used to pay for stimulating the economy, the Financial Times reported, citing Koutaro Tamura, an upper house Diet member.

Yoshihide Suga, deputy chairman of the ruling Liberal Democratic Party election strategy council, is among the group of politicians that will suggest 30 trillion yen of the scrip for programs for new industries and projects such as doubling the size of Tokyo’s Haneda airport, the report said. The other 20 trillion yen worth of the new currency would be allocated to government purchases of stocks and real estate.


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China pushing hard on exports


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Looks like at least part of the plan is to push exports via lower prices.

China to Raise Export Rebate for Textiles to 15%, Xinhua Says

by Zhang Dingmin

Feb 4 (Bloomberg) — China will raise export tax rebates for textiles and garments to 15 percent from 14 percent, the Xinhua News Agency reported today, citing a meeting by the State Council.

The move was part of a plan to boost the textile industry, the official news agency said. The council also passed a plan to support the nation’s equipment manufacturing industry, it said.


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2009-02-06 USER


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Karim writes:

Job losses picking up speed and hours worked continue to plunge.

  • -598k job losses in January
  • Benchmark revision for 2008, -400k
  • Unemployment rate up from 7.2% to 7.6%
  • Hours worked down another 0.7% (biggest driver of personal income)
  • Augmented unemployment rate rises from 13.5% to 13.9% (was 8.7% in December 2007)
  • Diffusion index down to 25.3 from 25.5 (only 2 sectors to add jobs were education, 54k, and government, 6k)

Change in Nonfarm Payrolls (Jan)

Survey -540K
Actual -598K
Prior -524K
Revised -577K

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Change in Nonfarm Payrolls YoY (Jan)

Survey n/a
Actual -3500.00
Prior -2589.00
Revised n/a

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Nonfarm Payrolls ALLX (Jan)

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Unemployment Rate (Jan)

Survey 7.5%
Actual 7.6%
Prior 7.2%
Revised n/a

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Unemployment Rate ALLX 1 (Jan)

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Unemployment Rate ALLX 2 (Jan)

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Change in Manufacturing Payrolls (Jan)

Survey -145K
Actual -207K
Prior -149K
Revised -162K

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Change in Manufacturing Payrolls YoY (Jan)

Survey n/a
Actual -7.7%
Prior -5.9%
Revised n/a

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Average Hourly Earnings MoM (Jan)

Survey 0.2%
Actual 0.3%
Prior 0.3%
Revised 0.4%

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Average Hourly Earnings YoY (Jan)

Survey 3.6%
Actual 3.9%
Prior 3.7%
Revised 4.0%

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Average Hourly Earnings ALLX 1 (Jan)

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Average Hourly Earnings ALLX 2 (Jan)

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Average Hourly Earnings ALLX 3 (Jan)

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Average Weekly Hours (Jan)

Survey 33.3
Actual 33.3
Prior 33.3
Revised n/a


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