How will the market react to downgrade?

[Parkbandit]

So, how will the financial markets react tomorrow?

[prance1520]

I'm saying 2%. A lot of the fear is already built into the current prices since most firms were saying the US was going to have to pull a rabbit out of a hat to keep their AAA. Company profits are good, job reports are good, so there are positive points to hold on to. Not that 2% isn't a really bad day, but relatively I don't think it will get out of control.

[Parkbandit]

I'm saying 2%. A lot of the fear is already built into the current prices since most firms were saying the US was going to have to pull a rabbit out of a hat to keep their AAA. Company profits are good, job reports are good, so there are positive points to hold on to. Not that 2% isn't a really bad day, but relatively I don't think it will get out of control.

What job reports were "good"

I think this downgrade was more political than actual financial.. and it was released on a Friday to lessen it's impact. I still see it dropping significantly.. 5-7%

[prance1520]

http://money.cnn.com/2011/08/05/news/economy/july_jobs_report_unemployment/index.htm?iid=HP_Highlight

Job growth exceeded expectations by between 30-40k jobs. Its not all gravy now, but its about as good of news as we've gotten in terms of jobs in the past few years.

I agree its a political move meant to push Washington to let them know they aren't doing enough to balance the budget. If it does drop more than 2% or 3%, its based on long term fear and not on current market conditions (not that it isn't a valid reason, its just the market normally reacts more to current conditions than long term).

[Parkbandit]

http://money.cnn.com/2011/08/05/news/economy/july_jobs_report_unemployment/index.htm?iid=HP_Highlight

Job growth exceeded expectations by between 30-40k jobs. Its not all gravy now, but its about as good of news as we've gotten in terms of jobs in the past few years.

I agree its a political move meant to push Washington to let them know they aren't doing enough to balance the budget. If it does drop more than 2% or 3%, its based on long term fear and not on current market conditions (not that it isn't a valid reason, its just the market normally reacts more to current conditions than long term).

From your own link:

http://i2.cdn.turner.com/money/2011/08/05/news/economy/july_jobs_report_unemployment/chart-jobs-080311.top.gif

It wasn't as good as the media wanted us to believe.

[kookiegod]

I think it will be even.

I think this was the slap in the collective face of Congress to wake the fuck up and actually do what they were elected to.

The congressional approval rating is dismal, and I think come November 2012, unless things radically turn around, it could be the biggest blood letting in the history of US elections.

[Androidpk]

Where is the American spring?

[Parkbandit]

Where is the American spring?

It's worked so well for Egypt, Syria, Libya, Jordan, Yemen, etc....

[Androidpk]

It's worked so well for Egypt, Syria, Libya, Jordan, Yemen, etc....

Oh, you're right. We shouldn't even bother. Right.

[prance1520]

It wasn't as good as the media wanted us to believe.

Don't get me wrong, I don't think that report is signaling the return of America to greatness. It did however, exceed expectations (expectations were between 80k and 90k, actually was 117k). The market usually reacts very positively to this type of news, and that what we're analyzing, what the market will do, not how good the economy ACTUALLY is.

I won't be surprised if its down 5%, but I don't think it should drop that much. I'm counting on cooler heads to prevail and savvy investors sweeping in if it does take a plunge to pull it back up.

[Parkbandit]

Oh, you're right. We shouldn't even bother. Right.

What exactly would you like a US "Spring" to accomplish?

[Kembal]

Not voting. Europe's situation will be more of a factor in whatever the market does than S&P's downgrade of the U.S. (If Moody's or Fitch had also downgraded, then it'd be bad.)

[WRoss]

I voted for 7% because there is no 5-7% option.

[Archigeek]

You guys aren't expecting the market's reaction to be rational are you? Just about the only thing that can be safely said, is that the market almost always overreacts.

The market has already done plenty of that this year, in the irrationally exhuberant run up, as well as the recent precipitous fall.

I have no idea what will happen, but what does one day matter anyway? Even though I think it's a pointless exercise, I'll cast my lot at a seesaw day, starting and ending with downward runs.

[prance1520]

So far, the Dow futures are down 1.8% (203 points). We'll see how much of a hysteria run happens.

[waywardgs]

Down significantly at first. Cooler heads will prevail in the afternoon and by close it will break even.

[Parkbandit]

Good to see the market isn't in full blown panic.. it's "only" down 200 now.. with signs of it leveling off. Maybe it won't be as bad as first anticipated.

[Atlanteax]

Market has already been (excessively) going down during the "Debt Crisis" and obviously the news from S&P will be adding insult to injury.

I'd be of the opinion that market will react negatively, but it will not be a "crash" since so much negativism has already been priced in.

[Cephalopod]

For some reason, I was posting in the respond to rep thread about this...

My prediction: down initially today, will begin a recovery before market close. The rest of the week will be reasonably flat.

Upshot: S&P made a bargain that they are more relevant than Moody's or other ratings agencies. They are going to be proven wrong, and their rating's worth will be reduced.

[Sam]

I think silver prices might go down for a while as people need to get some dollars and the market might get saturated. They'll probably jump back up to around $8 before EG. That's what this thread is about, right?

[Parkbandit]

Good to see the market isn't in full blown panic.. it's "only" down 200 now.. with signs of it leveling off. Maybe it won't be as bad as first anticipated.

Down 344... the 10am leveling off didn't continue like I thought.

[Androidpk]

I think we just need to nuke wall street from orbit. It's the only way to be sure.

[4a6c1]

We just need to (anything) from orbit.

[Ardwen]

Fannie and Freddie downgrade with such excellent timing, on the plus side oil is down now too

[Latrinsorm]

Responding to this here rather than the rep thread:
And Moody's, on the other hand, seems to give support for the decision to cut spending: ... The second bolded seems to suggest that the Tea Party didn't push hard enough for more cuts.This is a very interesting statement. S&P's statement specifically refers to Congress' current inability to raise revenue, and specifically finds the spending reductions implausible and irrelevant. Why would you respond about further cutting spending?

[Parkbandit]

Responding to this here rather than the rep thread:This is a very interesting statement. S&P's statement specifically refers to Congress' current inability to raise revenue, and specifically finds the spending reductions implausible and irrelevant. Why would you respond about further cutting spending?

You do know what Moody's is, right.. and the similarities they have with S&P?

[Latrinsorm]

You do know what Moody's is, right.. and the similarities they have with S&P?The Moody's statement doesn't mention cutting spending at all.

[Parkbandit]

The Moody's statement doesn't mention cutting spending at all.

You might want to actually read the statement. Here, I'm feeling charitable today.. so I'll highlight the section and provide you a link.

http://www.moodys.com/research/Moodys-confirms-US-Aaa-Rating-assigns-negative-outlook?lang=en&cy=global&docid=PR_223568

In confirming the Aaa rating, Moody's also recognized that today's agreement is a first step toward achieving the long-term fiscal consolidation needed to maintain the US government debt metrics within Aaa parameters over the long run. The legislation calls for $917 billion in specific spending cuts over the next decade and established a congressional committee charged with making recommendations for achieving a further $1.5 trillion in deficit reduction over the same time period. In the absence of the committee reaching an agreement, automatic spending cuts of $1.2 trillion would become effective.

[BriarFox]

Moody's also recognized that today's agreement is a first step toward achieving the long-term fiscal consolidation needed to maintain the US government debt metrics within Aaa parameters over the long run.

There are other ways to achieve fiscal stability than cutting spending. Obama's original proposition to raise taxes and cut spending would have been far more effective than a cuts-only program.

[Suppa Hobbit Mage]

There are other ways to achieve fiscal stability than cutting spending. Obama's original proposition to raise taxes and cut spending would have been far more effective than a cuts-only program.

I can only think of three solutions, other than the three below, what are you thinking?

Increase revenue
Reduce spending
A blend of both the aboveBalancing a budget isn't rocket science. I'd like to see justification for everything we spend money on, rather than a status quo budget with x% increases every year.

[BriarFox]

I can only think of three solutions, other than the three below, what are you thinking?

Increase revenue
Reduce spending
A blend of both the aboveBalancing a budget isn't rocket science. I'd like to see justification for everything we spend money on, rather than a status quo budget with x% increases every year.

No, I was just replying to PB's "cuts are the only way to balance the budget; the Tea Party should have pushed harder" notion.

[Parkbandit]

There are other ways to achieve fiscal stability than cutting spending. Obama's original proposition to raise taxes and cut spending would have been far more effective than a cuts-only program.

Obama/Jan '11 would disagree.. saying raising any taxes during an economic difficult period would harm the overall economy. If we were to raise taxes during a strong economy, then I might be persuaded to agree with you.. but this isn't a strong economy.

[BriarFox]

Raising taxes isn't inherently harmful to the economy. The money still gets spent on the other side of the equation, and can in fact bolster programs to assist people troubled by the shaky economy.

[Parkbandit]

Raising taxes isn't inherently harmful to the economy. The money still gets spent on the other side of the equation, and can in fact bolster programs to assist people troubled by the shaky economy.

There is a difference between raising taxes and raising taxes in an economic difficult period.

I agree that raising taxes (even though I am against high taxes) or closing loopholes or removing subsidies for companies during economic boom times is actually sometimes helpful for the overall health of the economy. It's not during an economic hard period where the government should be doing everything it can to create an environment that businesses can flourish in.

[Cephalopod]

There is a difference between raising taxes and raising taxes in an economic difficult period.

I agree that raising taxes (even though I am against high taxes) or closing loopholes or removing subsidies for companies during economic boom times is actually sometimes helpful for the overall health of the economy. It's not during an economic hard period where the government should be doing everything it can to create an environment that businesses can flourish in.

You could make the same argument, replacing 'raising taxes' with 'cutting spending', re: timing.

[Kithus]

There is a difference between raising taxes and raising taxes in an economic difficult period.

I agree that raising taxes (even though I am against high taxes) or closing loopholes or removing subsidies for companies during economic boom times is actually sometimes helpful for the overall health of the economy. It's not during an economic hard period where the government should be doing everything it can to create an environment that businesses can flourish in.

There is a difference between cutting spending and cutting spending in an economic difficult period.

I agree that reducing the deficit (which I'm not at all against) or lowering government spending or removing subsidies for people who won't care for themselves during economic boom times is actually helpful for the overall health of the economy. It's not during an economic hard period where the government should be doing everything it can to create an environment that consume spending can flourish in.

We're ignoring basic keynesian economics right now. You don't balance the budget during a recession. These Tea Party nut jobs that insist on reducing the deficit at a time when the government should be engaged in deficit spending are going to cause another Great Depression if they are allowed to continue.

The government should have been balancing the budget and reducing the deficit when the economy was sound. When things go south they should be increasing spending to jump start the stalling economy. One could argue that the free market economy will right itself in the long run but to quote Keynes:

The long run is a misleading guide to current affairs. In the long run we are all dead.

[Parkbandit]

You could make the same argument, replacing 'raising taxes' with 'cutting spending', re: timing.

Absolutely.

If we were carrying far less debt, I would be on your side of the aisle in saying that we shouldn't worry about the debt right now and that once we get out of this economic shitstorm, we would focus our efforts on lowering it.

[Cephalopod]

Absolutely.

If we were carrying far less debt, I would be on your side of the aisle in saying that we shouldn't worry about the debt right now and that once we get out of this economic shitstorm, we would focus our efforts on lowering it.

So, during the economic shitstorm is a good time to make major policy shifts to cut spending, despite the fact that those decisions will cost jobs and revenues?

If this is the case, what was the critical mass of debt where it became untenable?

[Parkbandit]

So, during the economic shitstorm is a good time to make major policy shifts to cut spending, despite the fact that those decisions will cost jobs and revenues?

I believe it's a good time to go through our budget and start slashing and cutting the waste and fraud of our federal government. And unlike most Conservatives, this includes Defense.



If this is the case, what was the critical mass of debt where it became untenable?

It's been untenable for 5-8 years now... 100% of GDP is a pretty good indicator of our government fucking up.

[Kithus]

If this is the case, what was the critical mass of debt where it became untenable?

Were I agree with PB on this, and I don't, I would say the critical point comes when our total debt passes our annual GDP which it will by the end of the year if it hasn't already. Unfortunately it does not change the fact that a period of economic downturn is not the time to reduce the deficit.

[Tgo01]

Unfortunately it does not change the fact that a period of economic downturn is not the time to reduce the deficit.

Is it just me or does this argument seem to be a never ending cycle? You can't reduce the deficit during a recession because bad things happen, you can't reduce the deficit during a recovery because that will put us back in a recession, you can't reduce the deficit when times are good because Congress is a bunch of jackasses and has never done such a thing.

[crb]

Well... we tried increasing the deficit during an economic downturn and employment went over 8%. So lets try the opposite now. I mean, the keynesians have had their turn, it didn't work. Let someone else have a shot.

You certainly shouldn't be increasing spending while tax revenues are falling, right? Lets rewind to 2007 and see if we can do that. Remember the huge discretionary spending bumps in Obama's first budget?

Remember the Great Depression? In the end all the government meddling prolonged it.

http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx

So if your plan is just to keep the spigot open until things improve, you might just end up drowning us all.

In reality though, it isn't government spending or a lack there of that will get things moving again. It is corporate spending, and you won't have that so long as Obama insists on beating them over the head with regulation after countless regulation, not to mention all the tax uncertainty that his profligate spending creates.

PS... DOW was down 300, Obama started talking, Obama stopped talking. Dow was down 500.

[Tgo01]

PS... DOW was down 300, Obama started talking, Obama stopped talking. Dow was down 500.

That's an old gag that goes back since...I don't know probably the first president to start communicating to the country via radio.

[Cephalopod]

Remember the Great Depression? In the end all the government meddling prolonged it.

http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx


Are you fucking kidding me? Did you even look at the methodologies used for that paper? (Hint: look at how they count WPA and CCC workers, then look at the wage and employment numbers. Also, pay close attention to the years sampled.) That is the most retarded thing I've ever seen come out of California, and that is saying a lot. These two economists had an axe to grind with organized labor, and this was the best they could muster?

[Latrinsorm]

You might want to actually read the statement. Here, I'm feeling charitable today.. so I'll highlight the section and provide you a link.I was going by what you quoted in the other thread. Weren't you?

[Cephalopod]

Well... we tried increasing the deficit during an economic downturn and employment went over 8%. So lets try the opposite now. I mean, the keynesians have had their turn, it didn't work. Let someone else have a shot.

Okay, having had my little fit over that retarded paper...

It's hard to claim increasing the deficit as a means of reversing the economic downturn has been "tried": the stimulus that was passed was so watered down and ineffectual, it's hard to say the Keynesians 'had their turn', since the amounts and distribution of spending that would have been required were not even close to reached. Since 1/3 of the original $900b stimulus bill was tax cuts, you've got $650b in actual stimulative monies. This is compared to the >$1T that economists indicated would be necessary. If we couldn't get to that level, the overall stimulus was a waste and not a valid test of Keynesian stimulus. For this reason, Obama and the Democratic leadership is fully to blame for the failure of the stimulus.



You certainly shouldn't be increasing spending while tax revenues are falling, right?

Why? Governments work at the macroeconomic level, not the micro.

[Parkbandit]

I was going by what you quoted in the other thread. Weren't you?

That wasn't from Moody's, that was a news article from msn.com that talked about the Moody's report.

If you want to make a post regarding the information in the actual statement.. it makes sense that you should actually read the statement.

[Kithus]

Is it just me or does this argument seem to be a never ending cycle? You can't reduce the deficit during a recession because bad things happen, you can't reduce the deficit during a recovery because that will put us back in a recession, you can't reduce the deficit when times are good because Congress is a bunch of jackasses and has never done such a thing.

So your argument is that we should reduce the deficit at the wrong time because you don't trust congress to reduce it at the right time? I can't disagree that they screwed up not dealing with the deficit while the economy was good. That's when you rein it in. It doesn't change the fact that reducing or eliminating deficit spending during times of economic hardship is simply going to make things worse.



In reality though, it isn't government spending or a lack there of that will get things moving again. It is corporate spending, and you won't have that so long as Obama insists on beating them over the head with regulation after countless regulation, not to mention all the tax uncertainty that his profligate spending creates.


Obviously its time to deregulate because that worked so well prior to this. Maybe you forgot that's how this whole mess got started?

[Parkbandit]

So your argument is that we should reduce the deficit at the wrong time because you don't trust congress to reduce it at the right time? I can't disagree that they screwed up not dealing with the deficit while the economy was good. That's when you rein it in. It doesn't change the fact that reducing or eliminating deficit spending during times of economic hardship is simply going to make things worse.

While that's good in theory.. it rarely ever happens in actual practice. Even in most households, when times are good.. spending increases, credit card bills go higher, etc... no one pays attention to it until the money starts disappearing.



Obviously its time to deregulate because that worked so well prior to this. Maybe you forgot that's how this whole mess got started?

Do you believe more or less regulations help create a positive environment for businesses? And what about the pressures placed on banks by the government to allow easier access to mortgages by people who couldn't afford them?

[prance1520]

My down 2% was looking good...until the afternoon sell off. Brutal. At least I have that cash stuffed under my matress.

[Ardwen]

Have to say I am glad I got a pile of gold coins in my grandfathers will back in the early 90. a few dozen 1 oz Krugerands are suddenly alot more interesting to me.

[Parkbandit]

My down 2% was looking good...until the afternoon sell off. Brutal. At least I have that cash stuffed under my matress.

That cash will be near worthless soon enough...

[Parkbandit]

Have to say I am glad I got a pile of gold coins in my grandfathers will back in the early 90. a few dozen 1 oz Krugerands are suddenly alot more interesting to me.

Yea.. glad I moved from stocks to metals in 2008. I was questioning that decision just a couple months ago... now I'm glad I stuck it out.

[Androidpk]

Gold bubble going to pop next.

[Cephalopod]

Gold bubble going to pop next.

Yup yup.

I have all my money in Uranium. It makes my balls glow orange, but I feel secure having it.

[Tgo01]

So your argument is that we should reduce the deficit at the wrong time because you don't trust congress to reduce it at the right time? I can't disagree that they screwed up not dealing with the deficit while the economy was good. That's when you rein it in. It doesn't change the fact that reducing or eliminating deficit spending during times of economic hardship is simply going to make things worse.

My argument is it seems like there is never a 'good time' to reduce the deficit because there always seems to be some expert out there who everyone at the time listens to who says now is the wrong time to reduce the deficit. That and Congress is full of jackasses.

[Parkbandit]

Gold bubble going to pop next.

They were saying that when I first got into gold.... now it's at 1700 an ounce.

If it does pop, that means we got our fiscal house in order. I don't see that anytime soon.

[Parkbandit]

Survey says:

Brute, Insodus, Kithus, Kuyuk, Parkbandit, RojoDisco, Seizer, Smythe, Thickbeard, Tolwynn, Tsk Tsk, ~Rocktar~ and I'll even give credit to WRoss

-635 points or 5.6%

[Ardwen]

In this poll the more incorrect I was the happier I am

[NocturnalRob]

Yea.. glad I moved from stocks to metals in 2008. I was questioning that decision just a couple months ago... now I'm glad I stuck it out.
I'm assuming you're talking about ETFs, and not the actual metal itself and/or mining companies?

And anyone who didn't see at least a 3% drop coming needs to pay more attention to the European/Asian markets. No way the US markets were going to survive Monday when the Athens Exchange is down 7% before NYSE even opens. I wouldn't be surprised if it drops another 2-3% tomorrow.

And gold is good for a long, long while, along with silver.

[Parkbandit]

I'm assuming you're talking about ETFs, and not the actual metal itself and/or mining companies?


ETFs and actual metal holdings.

[WRoss]

What metals are you invested in PB?

[Cephalopod]

Still thinking we'll be close to even for the week.

LOL @ bond markets, reinforcing how irrelevant S&P just proved themselves.

[Insodus]

Survey says:

Brute, Insodus, Kithus, Kuyuk, Parkbandit, RojoDisco, Seizer, Smythe, Thickbeard, Tolwynn, Tsk Tsk, ~Rocktar~ and I'll even give credit to WRoss

-635 points or 5.6%

Woot, I guessed right!

Wait... oh fuck... but my net worth just dropped 3%.... DOH

[Kembal]

Were I agree with PB on this, and I don't, I would say the critical point comes when our total debt passes our annual GDP which it will by the end of the year if it hasn't already. Unfortunately it does not change the fact that a period of economic downturn is not the time to reduce the deficit.

Even that isn't a good metric. If we have another recession and GDP gets smaller, that suddenly doesn't make the debt untenable and thus cut gov't spending. It means we should grow GDP. (and yes, that means increasing gov't spending.)

[Parkbandit]

Even that isn't a good metric. If we have another recession and GDP gets smaller, that suddenly doesn't make the debt untenable and thus cut gov't spending. It means we should grow GDP. (and yes, that means increasing gov't spending.)

It's worked so well so far..

http://www.trainfortopdollar.com/trainfortopdollar/wp-content/uploads/2008/12/joker-burning-money-in-tdk.jpg

[Kembal]

Well... we tried increasing the deficit during an economic downturn and employment went over 8%. So lets try the opposite now. I mean, the keynesians have had their turn, it didn't work. Let someone else have a shot.

Economics isn't a set of binary choices, if one fails, try the other one. Magnitudes matter.

You may want to look at the new revised GDP numbers from the recession. It was a much bigger hole than was originally thought, and in light of that, unemployment at 9% is a lot better than what could have been. However, it also says a $800B stimulus wasn't going to be enough. I'm not sure $1T would've been enough....probably $1.5T would've been needed.

[Parkbandit]

What metals are you invested in PB?

Gold and silver for actual holdings.

[Parkbandit]

Economics isn't a set of binary choices, if one fails, try the other one. Magnitudes matter.

You may want to look at the new revised GDP numbers from the recession. It was a much bigger hole than was originally thought, and in light of that, unemployment at 9% is a lot better than what could have been. However, it also says a $800B stimulus wasn't going to be enough. I'm not sure $1T would've been enough....probably $1.5T would've been needed.

So, your belief is that if we did a 2 trillion dollar stimulus bill back in '09.. we would have been out of this problem by now? We "only" went with 800 billion and that was part of the issue?

So... 800 billion gave us 10% unemployment.. if we did nothing, we would have had 8% unemployment.... what would 2 trillion dollars give?

[Warriorbird]

if we did nothing

Hmm.

[Parkbandit]

Hmm.

Something on your mind or is this just a brain fart?

[Kembal]

So, your belief is that if we did a 2 trillion dollar stimulus bill back in '09.. we would have been out of this problem by now? We "only" went with 800 billion and that was part of the issue?

So... 800 billion gave us 10% unemployment.. if we did nothing, we would have had 8% unemployment.... what would 2 trillion dollars give?

Uh, where do you get the idea that if we did nothing we would have had 8% unemployment? More likely we would have been at 12% or 14%, if not higher.

[Parkbandit]

Uh, where do you get the idea that if we did nothing we would have had 8% unemployment? More likely we would have been at 12% or 14%, if not higher.

It was part of the panic plan prior to the "Stimulus" being approved through Congress... that if we didn't hurry up and pass this important legislation, unemployment could hit 8%

[Cephalopod]

It was part of the panic plan prior to the "Stimulus" being approved through Congress... that if we didn't hurry up and pass this important legislation, unemployment could hit 8%

You may be mis-remembering. The claim was that WITH the stimulus, unemployment would peak at 8.5% (Eric Cantor said Obama used this number) and go no higher. Obviously this was wrong, but I don't think anyone expected unemployment to stay below 8%. Private sector projections were 11-13% without a stimulus, the other (partisan) government projections were higher.

[Keller]

You may be mis-remembering. The claim was that WITH the stimulus, unemployment would peak at 8.5% (Eric Cantor said Obama used this number) and go no higher. Obviously this was wrong, but I don't think anyone expected unemployment to stay below 8%. Private sector projections were 11-13% without a stimulus, the other (partisan) government projections were higher.

Your facts are biased.

[Parkbandit]

You may be mis-remembering. The claim was that WITH the stimulus, unemployment would peak at 8.5% (Eric Cantor said Obama used this number) and go no higher. Obviously this was wrong, but I don't think anyone expected unemployment to stay below 8%. Private sector projections were 11-13% without a stimulus, the other (partisan) government projections were higher.

Yea.. you might be right:

"In January, President Obama pressed for an $800 billion economic “stimulus” package to turn the economy around. Though the bill largely consisted of increased spending on traditional liberal priorities, the President claimed that it would “create or save” 3.5 million jobs. The President’s economic advisors predicted that unemployment would rise to 9 percent by 2010 if Congress did not pass the stimulus bill, but that with the stimulus unemployment would stay below 8 percentage points."

http://blog.heritage.org/2009/07/02/unemployment-spike-defies-%E2%80%98stimulus%E2%80%99-claims/

[BriarFox]

The stimulus was a pretty half-ass maneuver. It needed to be bigger to actually work as Keynes argued they do.

[Cephalopod]

I have a stupid analogy in my head for the stimulus:

Keynesian economics suggests building a house with four walls, a roof and a floor as a way to stay out of the rain. Progressives / liberals wanted to build this house. Conservatives believed that the house would cost too much and was not worth building and we should all fashion our own umbrellas. As a compromise, Obama and the Democratic majority caved and agreed to build a house with two walls, a floor and a roof made of cheesecloth. No one was happy with this, but something had to be done. Conservatives claim the mostly ineffectual house is a failure of the idea of housing. Progressives claim is was a failure to build the house as required.

[Keller]

We should have just moved into a foreclosed house.

Morons.

[kookiegod]

What a wild ride...

Down 630 yesterday.

Down 200 at one point today...ended up +400.

Mr Speaker, please stop the rollercoaster, I want to get off.

[Parkbandit]

I have a stupid analogy in my head for the stimulus:

Keynesian economics suggests building a house with four walls, a roof and a floor as a way to stay out of the rain. Progressives / liberals wanted to build this house. Conservatives believed that the house would cost too much and was not worth building and we should all fashion our own umbrellas. As a compromise, Obama and the Democratic majority caved and agreed to build a house with two walls, a floor and a roof made of cheesecloth. No one was happy with this, but something had to be done. Conservatives claim the mostly ineffectual house is a failure of the idea of housing. Progressives claim is was a failure to build the house as required.

I agree.. it's a stupid analogy.

[Insodus]

unemployment at 9% is a lot better than what could have been.

This argument is such rubbish. You have no idea what unemployment would have been like if we didn't spend the money. On the other hand, we know exactly what our deficit would be like if we didn't spend the money.

[Ardwen]

The Fed saved what was starting to look like it was going to end a good start with sellers overwhelming buyers with their timely announcement

[Kembal]

This argument is such rubbish. You have no idea what unemployment would have been like if we didn't spend the money. On the other hand, we know exactly what our deficit would be like if we didn't spend the money.

There were pretty good private sector projections of what unemployment would've been, as Nachos pointed out earlier today. Anecdotally, I can say with certainty the stimulus saved both of my major customers (along with a bunch of smaller ones) from failing in 2009/2010, and those two companies alone represent about 30,000 jobs nationwide. There are going to be lots more cases like these for whom the stimulus ended up saving from failure.

Secondly, we actually don't know "exactly" what the deficit would've been like if we didn't spend the money. Tax receipts would've fallen even further.

[Parkbandit]

Secondly, we actually don't know "exactly" what the deficit would've been like if we didn't spend the money. Tax receipts would've fallen even further.

These two sentences make no sense together, in the same post.

[NocturnalRob]

These two sentences make no sense together, in the same post.
They barely make sense apart.

[Kembal]

These two sentences make no sense together, in the same post.

Ok, $800B was the cost of the stimulus.

1/3rd of it was tax cuts, so we can remove that from the equation.

For purposes of this discussion, we can say that state aid was 1/3rd (it was less), and infrastructure spending was the other 1/3rd.

All infrastructure spending would have become revenues to companies completing the infrastructure projects. As they work on the projects, they spend the money, with some of it becoming wages to employees and some of it spent buying materials from other companies. After costs, they also turn a profit.

All these profits and wages throughout the chain get taxed. We can take an effective tax rate of 22% for this exercise. (it might be less or more, I can't recall offhand right now what the economic literature says.)

$266.67B x .22 = $58.667B in tax receipts.

Same thing holds true for state aid, through it's probably a lower effective tax rate on that portion.

That's just direct tax receipts from the stimulus. If we had taken no action, and companies failed, obviously there's even more tax receipts lost.

Hence, we don't know "exactly" what the impact to the deficit would have been of doing no action.

In any case, worrying about the deficit when the economy is so weak is like worrying about a house fire when the nuclear plant down the road is in a full meltdown. You can't cut your way to economic growth in a liquidity trapped economy. You have to create demand.

[Parkbandit]

You didn't understand my point... the first sentence was you saying you can't tell what would have happened without the stimulus.. in the second you attempted to say what would happen.

When do we stop putting so much faith in the precious Keynesian Economic Theory and simply call it what it is... a bust? Granted, we will probably continue to keep doing what we've been doing... pissing away money on top of more money and hoping that we can spend our way out of a recession.. and turn this into what we will later call The Greater Depression.

[Warriorbird]

You didn't understand my point... the first sentence was you saying you can't tell what would have happened without the stimulus.. in the second you attempted to say what would happen.

When do we stop putting so much faith in the precious Keynesian Economic Theory and simply call it what it is... a bust? Granted, we will probably continue to keep doing what we've been doing... pissing away money on top of more money and hoping that we can spend our way out of a recession.. and turn this into what we will later call The Greater Depression.

The bit that nobody will admit is "Taxcut and Spend" is equally as ineffective as "Tax and Spend." Neither politicized economic theory really works.

[Parkbandit]

The bit that nobody will admit is "Taxcut and Spend" is equally as ineffective as "Tax and Spend." Neither politicized economic theory really works.

As a conservative, I actually subscribe to the "Taxcut and spending cut" economic theory.

[Warriorbird]

As a conservative, I actually subscribe to the "Taxcut and spending cut" economic theory.

Unfortunately Congress doesn't and hasn't in your lifetime. "This'll be the year!" is as ridiculous as notions of Obama as the Messiah.

[Parkbandit]

Unfortunately Congress doesn't and hasn't in your lifetime. "This'll be the year!" is as ridiculous as notions of Obama as the Messiah.

Taxcut and Spend is still preferable to Tax and spend. I'm at LEAST halfway there.

[Warriorbird]

Taxcut and Spend is still preferable to Tax and spend. I'm at LEAST halfway there.

What are reductions in revenue?

[Parkbandit]

What are reductions in revenue?

Tax cuts.

I'm fine with that.

[BriarFox]

You can't cut taxes and spend. It just balloons the debt -- e.g. Bush's tax cuts that added $2 trillion to the debt and his series of wars.

[Parkbandit]

You can't cut taxes and spend. It just balloons the debt -- e.g. Bush's tax cuts that added $2 trillion to the debt and his series of wars.

How did the economy react to tax cut and spend after the 2000/2001 recession?

[BriarFox]

How did the economy react to tax cut and spend after the 2000/2001 recession?

That's beside the point, as I hope you know. Even if cutting taxes can increase demand in the economy, the national debt increases as revenue decreases. An extrapolation sees the government collapse under debt and the economy crash.

[Parkbandit]

That's beside the point, as I hope you know. Even if cutting taxes can increase demand in the economy, the national debt increases as revenue decreases. An extrapolation sees the government collapse under debt and the economy crash.

So wait.. now debt IS important? More important than the actual economy?

Can you guys just flat out state what your position is.. because it seems to change by the hour.

[BriarFox]

So wait.. now debt IS important? More important than the actual economy?

Can you guys just flat out state what your position is.. because it seems to change by the hour.

You learn to argue by watching Fox News, don't you?

[Keller]

So wait.. now debt IS important? More important than the actual economy?

Can you guys just flat out state what your position is.. because it seems to change by the hour.

?

[Cephalopod]

?

Clearly a sexist.

[Parkbandit]

You learn to argue by watching Fox News, don't you?

I'll try to dumb it down for you.. since you learned how to argue by watching Mr. Rogers Neighborhood.


You made the claim that you can't cut taxes and increase spending because it increases debt... even when it has historically turned the economy around.. increasing debt is bad. Yet someone on the same side of the isle previous stated:



In any case, worrying about the deficit when the economy is so weak is like worrying about a house fire when the nuclear plant down the road is in a full meltdown. You can't cut your way to economic growth in a liquidity trapped economy. You have to create demand.

So which is it?

[BriarFox]

I'll try to dumb it down for you.. since you learned how to argue by watching Mr. Rogers Neighborhood.


You made the claim that you can't cut taxes and increase spending because it increases debt... even when it has historically turned the economy around.. increasing debt is bad. Yet someone on the same side of the isle previous stated:



So which is it?

I'm talking about general policies, not emergency maneuvers. X /= Y.

[Keller]

More importantly, can you please argue with people and not generic ideologies?

There is no liberal or conservative school people go to be indoctrinated.

[CrystalTears]

There is no liberal or conservative school people go to be indoctrinated.
And if there were, I'd be screwed as they wouldn't have a former semi-conservative school. :(

[Keller]

And if there were, I'd be screwed as they wouldn't have a former semi-conservative school. :(

Great point.

[BriarFox]

The independents would go on picnics during indoctrination time, like the students whose parents protest sex ed.

[~Rocktar~]

That's beside the point, as I hope you know. Even if cutting taxes can increase demand in the economy, the national debt increases as revenue decreases. An extrapolation sees the government collapse under debt and the economy crash.

No, the debt increases when you spend more than you have. Revenue can decrease and it does not automatically require increasing debt. This is the logical disconnect of all Liberal fiscal arguments. Revenue decrease does NOT automatically equal debt increase.

[Parkbandit]

I'm talking about general policies, not emergency maneuvers. X /= Y.

So, state your general policy when it comes to the economy. Clearly, this general policy wouldn't be used in our current situation.

[BriarFox]

No, the debt increases when you spend more than you have. Revenue can decrease and it does not automatically require increasing debt. This is the logical disconnect of all Liberal fiscal arguments. Revenue decrease does NOT automatically equal debt increase.

Isn't the inside of your ass empty yet? I was responding to a "cut-taxes and spend argument," with a constant level of spending implicit.

[BriarFox]

So, state your general policy when it comes to the economy. Clearly, this general policy wouldn't be used in our current situation.

Moderate taxes based dynamically on income, spending on social programs, defense, research, foreign aid, and the environment within the capability of the budget and reason, and a reduction of the national debt. In certain circumstances, spending would exceed the budget of the current year, but those cases should be strategic investments that pay off in the longer term.

[~Rocktar~]

Isn't the inside of your ass empty yet? I was responding to a "cut-taxes and spend argument," with a constant level of spending implicit.

No, you were spouting your usual bullshit as always and when called on it, backpeddling as usual.

[BriarFox]

No, you were spouting your usual bullshit as always and when called on it, backpeddling as usual.

How's the weather on Pluto?

[waywardgs]

How's the weather on Pluto?

I just read there are three other newly discovered possible dwarf planets out around neptune.

edit: http://www.wired.com/wiredscience/2011/08/dwarf-planets-kuiper-belt/

[BriarFox]

I just read there are three other newly discovered possible dwarf planets out around neptune.

edit: http://www.wired.com/wiredscience/2011/08/dwarf-planets-kuiper-belt/

Oh, that makes sense. Hey, Rocktar, how's the weather on Dwarf Planet 3?

[Latrinsorm]

You didn't understand my point... the first sentence was you saying you can't tell what would have happened without the stimulus.. in the second you attempted to say what would happen.An important word in the first sentence was "exactly". Bounds can be set on an unknown without determining it exactly.

[NocturnalRob]

More on the actual thread topic--Dow down ~3% so far today, gold still shooting up, and the yield on the 10-year is a fucking joke.

[Bobmuhthol]

No, the debt increases when you spend more than you have. Revenue can decrease and it does not automatically require increasing debt. This is the logical disconnect of all Liberal fiscal arguments. Revenue decrease does NOT automatically equal debt increase.

I'm not liberal, but I'm enough of an economist to understand that a revenue decrease does necessarily coincide with a debt increase, ceteris paribus. It is very obvious that whoever said that (BriarFox?) was speaking strictly about the relationship between revenue and debt.

[Kembal]

You didn't understand my point... the first sentence was you saying you can't tell what would have happened without the stimulus.. in the second you attempted to say what would happen.

Ah, I think you misunderstood my point. Insodus claimed that we knew exactly the increase in our debt due to the stimulus. My point was to deomnstrate that wasn't the case. Hence putting the word exactly in quotes.


When do we stop putting so much faith in the precious Keynesian Economic Theory and simply call it what it is... a bust? Granted, we will probably continue to keep doing what we've been doing... pissing away money on top of more money and hoping that we can spend our way out of a recession.. and turn this into what we will later call The Greater Depression.

You seem very confused as to what Keynesian economic theory proved during the Great Depression. Keynesian programs were used by FDR to start a recovery at the onset of the Great Depression. In 1937, FDR thought he could balance the budget, and therefore cut spending and raised taxes, which reveersed the recovery. The Depression thus continued until 1941, until U.S. entry into World War II.

If you can provide an example as to where Keynesian stimulus (done at the correct magnitude) has not worked since the 1930s in a recession/depression scenario, I'd be interested in reading about it.

[Parkbandit]

You seem very confused as to what Keynesian economic theory proved during the Great Depression. Keynesian programs were used by FDR to start a recovery at the onset of the Great Depression. In 1937, FDR thought he could balance the budget, and therefore cut spending and raised taxes, which reveersed the recovery. The Depression thus continued until 1941, until U.S. entry into World War II.

So.. for 4 years Keynesian programs didn't work.. so he wanted to try something else?



If you can provide an example as to where Keynesian stimulus (done at the correct magnitude) has not worked since the 1930s in a recession/depression scenario, I'd be interested in reading about it.

Off the top of my head... let's see, maybe Japan.. right before the "Lost Decade". I love how you quantify things with "(done at the correct magnitude)" because that is the excuse ALWAYS given by Keynesians when their economic theory flops... "We didn't spend ENOUGH!"

[Bobmuhthol]

Cutting spending and raising taxes is the opposite of Keynesian policy.

[Parkbandit]

Cutting spending and raising taxes is the opposite of Keynesian policy.

Who said it isn't? And it's not exactly the opposite.. raising taxes is a big part of the theory.

[Kembal]

Who said it isn't? And it's not exactly the opposite.. raising taxes is a big part of the theory.

Only in good times, to ensure you run a budget surplus that pays down the debt you incurred in bad times.

[Bobmuhthol]

I guess I'm lost. Kembal said that FDR cut spending and raised taxes, which was a very bad thing; you seem to be arguing that it was somehow a Keynesian policy and thus Keynesian economics sucks.

I have never heard of a Keynesian policy which called for raising taxes. The necessity of higher taxes than there would otherwise be to fund the larger government, sure, but Keynesian economics is, as Hicks described it, depression economics. It would be silly to increase taxes during a depression, and Keynes was fully aware of that.

[Kembal]

So.. for 4 years Keynesian programs didn't work.. so he wanted to try something else?

No, he thought the recovery was on solid enough footing. He was wrong.


Off the top of my head... let's see, maybe Japan.. right before the "Lost Decade". I love how you quantify things with "(done at the correct magnitude)" because that is the excuse ALWAYS given by Keynesians when their economic theory flops... "We didn't spend ENOUGH!"

Right before the Lost Decade? Did you miss the part where they sharply raised interest rates and thus caused the crash? (raising interest rates isn't Keynesian policy)

In fact, looking at the economic history for that time period, I see no reference to a use of Keynesian fiscal policy tools until the end of the 1990s, after the lost decade had happened. At that point, it's kind of late.

[Tsa`ah]

They were saying that when I first got into gold.... now it's at 1700 an ounce.

If it does pop, that means we got our fiscal house in order. I don't see that anytime soon.

You base this on what exactly?

Gold hit the record high of $850/oz at the beginning of 1980 (that's $2,328.44 adjusted to today) and then took a nose dive a little later to around $300/oz (821.80 adjusted to today) ... and our fiscal house wasn't exactly in horrible shape (though it was about ready to get the shit kicked out of it).

You can't peg a bubble bursting on the health of fiscal house ... you're essentially saying that bubbles (generic) pop when the government has a control on the budget (spending and revenues). History has pretty much shown that bubbles tend to go pop when things are on the head end of a slide ... or the pops cause slides.

The gold bubble bursts when there is a massive dump of holding into the market ... or people realize the price is ridiculous and they just stop buying.


You may be mis-remembering. The claim was that WITH the stimulus, unemployment would peak at 8.5% (Eric Cantor said Obama used this number) and go no higher. Obviously this was wrong, but I don't think anyone expected unemployment to stay below 8%. Private sector projections were 11-13% without a stimulus, the other (partisan) government projections were higher.

I don't believe Obama actually mentioned those numbers ... aids out of his administration did. Likely "former" aids not long after.

[Suppa Hobbit Mage]

Only in good times, to ensure you run a budget surplus that pays down the debt you incurred in bad times.


I have never heard of a Keynesian policy which called for raising taxes. The necessity of higher taxes than there would otherwise be to fund the larger government, sure, but Keynesian economics is, as Hicks described it, depression economics. It would be silly to increase taxes during a depression, and Keynes was fully aware of that.

Kembal covered it, but for Keynesian economics to work it needs to be in place in the "good" times as well as the "bad". You are correct that the theory wouldn't raise taxes during a depression, but to counter that it plans for a surpluss of revenue from either taxes during an economic boom, or reducing government spend.

You can't start following the model only during down trends and expect it to work - at least thats my basic understanding.

[Atlanteax]

The problem is politicians are too worried about the short-term (getting elected) than the long-term (health of the economy for their descendents & the public).

[Fallen]

What do we think for today? I will go with closing within 50 points of its current mark in either direction.

[Ardwen]

Off to a good start this morning, but the daily waffling is very much alive, if it goes up enough people start taking profits and running and a new mini-panic seems to ensue and a larger sell off starts.

[waywardgs]

The traders seem to be running the market these days.. it's gone off the rails. No consistency at all.

[~Rocktar~]

The traders seem to be running the market these days.. it's gone off the rails. No consistency at all.

They always have. To think otherwise is simply to be naive. That doesn't say that other things can't affect the market, only that those that trade the largest quantities run the show and they are the Traders.

[Ardwen]

the only real difference is technology, computer based traders and companies can make trades so fast its scary, we've seen what that can cause if it gets out of hand.

[Cephalopod]

the only real difference is technology, computer based traders and companies can make trades so fast its scary, we've seen what that can cause if it gets out of hand.

Blame Kranar!

[waywardgs]

Blame Kranar!

Sig worthy.

[Parkbandit]

Confidence among U.S. consumers plunged in August to the lowest level since May 1980, adding to concern that weak employment gains and volatility in the stock market will prompt households to retrench.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment slumped to 54.9 from 63.7 the prior month. The gauge was projected to decline to 62, according to the median forecast in a Bloomberg News survey.
The biggest one-week slump in stocks since 2008 and the threat of default on the nation’s debt may have exacerbated consumers’ concerns as unemployment hovers above 9 percent and companies are hesitant to hire. Rising pessimism poses a risk household spending will cool further, hindering a recovery that Federal Reserve policy makers said this week was already advancing “considerably slower” than projected.
“The mood is very depressed,” said Chris Christopher, an economist at IHS Global Insight Inc. in Lexington, Massachusetts. “Consumers are very fatigued and very uncertain. In the short term, people are going to pull back on spending.”
Estimates of 69 economists for the confidence measure ranged from 59 to 66.5, according to the Bloomberg survey. The index averaged 89 in the five years leading up to the recession that began in December 2007.
Stocks, which initially pared gains after the report, climbed as higher-than-estimated earnings tempered concern the economy is slowing. The Standard & Poor’s 500 Index rose 0.8 percent to 1,182.45 at 10:37 a.m. in New York. Treasuries increased, pushing down the yield on the benchmark 10-year note to 2.24 percent from 2.34 percent late yesterday.

http://www.bloomberg.com/news/2011-08-12/u-s-consumer-sentiment-falls-more-than-expected-to-54-9-in-michigan-index.html

3 decades ago.......... oh yea, good ol' Jimmy Carter. When do we start breaking out the "Misery Index" again?

I'm surprised the market is up this morning...

[AnticorRifling]

Psst.... PB, most of us weren't alive in 1980.

[Parkbandit]

Psst.... PB, most of us weren't alive in 1980.

And the only way you could know about things is to be alive during it.

Derp, derp.

[AnticorRifling]

And the only way you could know about things is to be alive during it.

Derp, derp.

And yet you tell Bob he can't just read it from a website but has to experience it...

CONTER DERP DERP.

[Sean]

And yet you tell Bob he can't just read it from a website but has to experience it...

CONTER DERP DERP.

Conter indeed.

[Parkbandit]

Conter indeed.

^

[Keller]

Conter indeed.

Wayne is batting 1000 today.

[AnticorRifling]

What can I say I'm keeping it classy.

I'm multi-tasking, damnit.

[Parkbandit]

Market taking a shit again today... flirting with 11,000 on the DJIA.

[Rinualdo]

10,901.

[g++]

Love the news articles today "Market plummets again : fear of double dip recession" click the link and the market has already rebounded. At what point will financial writers stop making fear mongering headlines like this. If you took everything they said literally the New York stock exchange traders would be the most panicked people on earth. Fearing a global recession one minute than instantly changing their mind. 60-70% of the trades are made by machines and they dont fear anything.

[Fallen]

60-70% of the trades are made by machines and they dont fear anything.

Not True.

http://images.wikia.com/terminator/images/3/34/Young_John_T2.jpg

[g++]

You mean actual trades vs volume? Fine 60-70% of the volume is by machines.

[Parkbandit]

You mean actual trades vs volume? Fine 60-70% of the volume is by machines.

No, the machines do fear things...

http://www.therevenution.com/wp-content/uploads/2011/04/neo-matrix1.jpeg

[g++]

Ah so the machines have been programmed to be irrational fear mongers gotcha.

[Parkbandit]

Ah so the machines have been programmed to be irrational fear mongers gotcha.

http://oi51.tinypic.com/2gvsl04.jpg