Posted by Larry Doyle on October 23rd, 2008 9:05 AM |
This post is written in response to the October 21st statement issued by the McCain/Palin campaign:
STATEMENT FROM SENATOR MCCAIN AND
GOVERNOR PALIN ON AN ECONOMIC STIMULUS
“We are deeply concerned about our nation’s economic outlook and will support measures that improve the outlook for American families. This economic crisis has its roots in the housing market and the most effective stimulus will be to reverse the cycle of foreclosure, neighborhood blight, and falling housing values. The American Homeownership Resurgence Plan is the best kind of stimulus.
“The Democrat-controlled Congress will likely propose additional measures. We do not believe that a national crisis should be taken as a license for wasteful spending or earmarked projects. Each new proposal must pass on the grounds that it is timely, effective in supporting business sales and job creation, and consistent with long-term fiscal discipline.
“In the past, raising taxes and cutting off international trade have only served to make hard economic times worse. We oppose harmful attempts to just ‘spread the wealth.’ Our job-creating economic plan is the best path for the economy and includes the types of policies that the Congress should consider.”
Prior to addressing the prospects of another economic stimulus plan, let’s review some of the steps that the Fed and Treasury have taken over the course of the last month: (more…)
Posted by Larry Doyle on October 14th, 2008 10:03 AM |
I share these opinions with you given the historic nature of the events currently going on in our global financial markets and economy. I hope that you find them of interest. I would be very interested in your thoughts as well. Much like that scene in the movie “Trading Places” when the wealthy tycoon “turn those machines back on,” I view this bailout package as nothing more than the best of a litany of very bad alternatives. Without being overly pessimistic, though, if you want to reduce this package to layman’s terms this package is the equivalent of a massive injection of capital/liquidity into a Ponzi scheme that was being played (whether they knew were playing it or not) by certain large financial institutions.
The systemic risk was so massive that something had to be done. That said, this injection of capital will not necessarily fully flow through to the economy.The banking system here in the U.S. likely has $1 trillion in embedded losses. This plan is trying to buy time for the system to recognize those losses. The recognition of those losses will curtail future growth for the banking system and the economy as a whole. The U.S. followed Europe’s lead and specifically Great Britains’ in making the direct capital injections into banks. If the U.S. did not there would likely have been a significant capital flight to Europe. However, while the U.S. is injecting 250mm (i.e., billion) as part of the 700mm package, Europe has injected 10 times that figure. We may still see a flight in capital away from our economy. Not that other economies are necessarily stronger, because they are not, but merely due to the fact that the level of nationalization of deposits is actually deeper. How do all these programs, both here in the U.S. and around the world get funded? What are the implications for the markets?
In my opinion, I see the following: