Category Archives: Politics

Conditions for Economic Recovery

On Le Monde’s site, an article was posted concerning the outlook for France’s economic recovery according to Prof. Patrick Artus: Les conditions d’une vraie reprise ne sont pas réunies. Reading the article, a similar argument can be made for the US, with the same conclusion: non, pas encore.

Much like us, France saw a 4th quarter uptick in growth, and much like us it was largely technical, related primarily to inventory depletion. In the US, businesses replaced inventory, but at a slower pace.  Another factor was higher productivity without higher wages.

Prof. Artus explains that in the 70s and 80s, economic cycles were usually linked to inflation – interest rates rose, business activity and consumer consumption slowed, inflation came down, the economy rebounded.  Boom.

Since then, inflation has been tamed, and today’s economic crises are tied more to asset bubbles and excessive indebtedness.  Under these circs., when the economy stumbles (the bubble pops or deficits start to matter), banks stop lending, businesses spending contracts and households consumption gives way to higher savings rates.

According to Prof. Artus, under an expansionist economic policy, the economy’s rebound will require lending to restart, businesses to start investing and households to start spending. (Se what he did there?  Just reverse the progression.  Economists! What can’t they figure out?!  Engineers are said to solve problems we didn’t know we had with solutions we can’t understand.  Can the same be said of economists?  Discuss.)  After some time, salaries will have to rise (remember, this is a Frenchman talking about France. L’union fait la force, l’oignon fait la soupe!).  Prof. Artus doesn’t think France has reached that point, and the idea that a rebound is underway, based on what is required under his economic model, is clearly a thought properly classified as ‘wrong.’

That very same argument can be made of the US, and, in a bit of a two-fer, this argument also helps explain my generally low regard of economists.  My initial responses to this argument are summed up thusly:  “Duh. Really?  You get paid for these insights?”

I admit, not the most professional response, but valid nonetheless.  If one requires evidence that the credit spigot has reopened and loans are flowing, business investment is up and on the rise, household consumption is climbing at the expense of savings, then one would be hard press to claim 4Q09 results in France or the US evidence of the economy’s rebound.  No, if those are your requirements, you will not see the rebound even if you are an optimist or a scientist*!  Under Patrick’s restrictions, you won’t see it unless you look to the past, because you’ll be very much in the midst of the recovery, or even well past it’s juicy bits, and likely to find the first part of the ‘buy low, sell high’ mantra no long available to the investor in you.

It would be more informative to point out where an economy is in its cycle based on the various measures of a model like Patrick’s, which suggests my criticisms may have more to do with the medium (newspapers, the Web) than the message.  In a classroom, I’m almost positive this would be explored to a more meaningful depth and presented in a more informative manner.  So, Prof. Artus, my beef isn’t with you, your model or your abilities, au contraire, but rather in the surfeit of credence given to sloppy economic writing in today’s media.

* A Pessimist sees the glass as half empty
An Optimist sees the glass as half full
A Scientist sees the glass as full of air and water


Inauguration 2009

Waiting for the Parade at the Newseum

Yesterday’s Inauguration of our 44th President was, of course, historic for many reasons, but it was extra special to me for one reason in particular. Seeing the 2 mile span of The Mall covered with a million people eager to participate in that historic event was awe inspiring.

Now it’s the morning of the first full day, and the real world requirements of the position must now weigh heavily on our new President’s shoulders, as they should. The burden looks especially heavy to me in light of the previous Administration’s lackluster performance. My blog, my opinion.

Yesterday, the market hit 14-year lows, which sets up the potential for strong gains for long term investors’ new investments  by virtue of the lower starting point. Or not. I mention this because of the parallel between the Bush and Obama administrations. The previous one was such a cumulative disaster that the comparative performance the new one has a strong shot at out-performance given its low starting base. Again, my blog, my opinion.

All the best to you, President Obama.  I hope that you and the market knock our socks off with solid upside performance that exceeds our collective expectations and hopes.

Detroit and Bankruptcy: Like Peanut Butter and Jelly?

Buy American?  Where do you think the house is?!

Jeeves? I'm going for a spin.

As GM, Ford and Chrysler continued their vaudevillian act in two parts up on Capital Hill today, the likelihood that the largest of the three automakers (GM) will be forced to restructure through bankruptcy continues to grow.  Both GM and Ford (F) touched 52 week lows today ($2.52 and $1.46, respectively), with their market capitalizations hitting $1.6 billion and $3.5 billion.  Wow. GM’s market cap is $1.6 billion.

At this stage, holding equity in GM is a risky proposition, but then again, I think the company needs to reorganize and management’s consistency in failing to find fault with themselves points to bankruptcy as being the most likely path to change.

This is the quote from the piece on day 1 of the Big Three leaders’ testimony before the Senate that says so little but yet so much (emphasis added):

The cause of their misfortunes was not management mistakes, they said, but the weak economy and the inability of consumers to obtain credit to buy cars.

Really?  It’s the weak economy and lack of consumer credit that has brought the American auto industry’s leadership to my fair city, hats in hands, Armani-clad knees tastefully genuflected before Senate banking committee?  Poor strategic management decisions have played no part in creating the mess that is now the American auto industry?  Really?  Yeah, uhmm.  No, I don’t think so.  Furthermore, by their logic, it would make more sense to bail out the car buyer instead of the car maker if the only problem is a lack of consumer credit.

Sorry gentlemen three of Detroit, but you have failed to make a compelling case to the American taxpayer (many of us struggling with fear, doubt, uncertainty and our own goddamn problems).  Why should we collectively put ourselves $50 billion deeper in the hole just so you can prolong this tragedy?


The Obama Inauguration – Hottest Ticket In Town

No Tickets AvailableThis screen shot from Congresswoman Elanor Holmes Norton’s webpage tells the tale about the hottest ticket in DC – Inauguration Tickets.  Just a day after it was announced that the best way for schmucks to get Inauguration Tickets was to contact the Inauguration Committee or your congress person, and politely request to have your name added to the list of potential recipients, Congresswoman Norton’s office was absolutely swamped with requests.

The demand for the hottest ticket in town (which hasn’t even been released yet!) was so great that this is what I found when I pulled up Congresswoman Norton’s site:  “Inauguration Tickets Not Available.  Please do not call or email.”

DC is going to be filled to the brim for this Inauguration.  I’ve been here for a few events, including Clinton’s first inauguration and the Million Man March.  The whispered word going around town points to Obama’s first inauguration drawing a very large crowd indeed.  Judging by the listings on Craigslist for housing during Inauguration week, like this $10,000/week condo in Kalorama this should be some party!  With my house near U Street, maybe I should consider engaging in a little opportunisitc capitalism myself.  Things that make you go “Hmmm” indeed!

Election Day 2008

Its your duty to participate.

H’s Curve waited only 3 hours this morning to firmly ensconce itself among the participants in this day’s historic event.  Even though the sky was cloud and threatening to rain, no one planned to move from the line without first casting their vote.

Early on, there was an elderly lady behind me in line.  Precinct officials were going up and down the line offering to lead the elderly up front so that they would not have to endure what was clearly going to be a long wait.  When she was asked, she declined the offer, adding, “I’ve waited a long time for this, so no thank you, I’ll wait here in line.”  I haven’t waited nearly as long as she has to participate in an historic election, but I sure felt the same way as I waited patiently to cast my vote.

‘Trickle-Up’ Economics – A Policy Whose Time Has Come? (Yeah, like 20 years ago.)

Couple of Swells

Couple of swells

Continuing my spittle-filled rant about the US economy, I’m going to change gears in this post and approach the subject not from the side of what’s wrong, but rather what can be done to make things right.

In a previous post, I noted that the US economy is driven by middle class consumption, so policy makers that push supply-side economic policies to de-hobotize our economy seem very hopeful, at best, that they can motivate the middle by giving to the top.  What is the fucking goal here? Motivate the middle class through envy to work harder for a few extra scraps to be tossed their way?  I mean, sure that shit hasn’t worked since, what, 1982, but hey, that’s no reason to stop trying! Right? Guys?

Supply-side economics seems predicated on the quaint notion that eventually the drippings will drizzle down the chins of America’s swellegant set to sate the thirst and fuel the consumption of the nation’s remaining 95%.  Meanwhile, as we wait and the temperature falls, don’t be surprised to hear:  “Jeeves! I’ve a discomforting chill in the marrow. I say, throw another hobo on the fire, there’s a good man.”  That is, unless you are the hobo.

Seems a quicker path would be to directly pass a goodish chunk of The Splurge funds directly to the remaining 95% and let them have a go at it (consuming that is.)  And by directly, I mean the provision of cash, not just the reduction of taxes.    Quite frankly, the recent economic nightmare the lower and middle class is living these days will leave most hesitant to shove cash out the door when the bank account is running low and the bills piling high.

Not only is America’s economic engine fueled by middle-class consumption, it is also dependent on small businesses to employ the bulk of its citizens – not on the Cokes, GMs and Goldman Sachs of the world. Those two facts alone bolster the argument that the key to America’s economic recovery, its pace and depth, resides with the middle class. Specifically, the middle class must have two key resources (money and confidence) if America is going to pull itself (sooner rather than later) out of this deep-ass economic hole it has dug for itself.  At the moment, we seem to be unkindly short of both but stuffed to the gills with debt and uncertainty.  (Ruh roh!)  Any plan that is to work must provide us the former two will riding us of the latter two.  To put forth anything less would be un-American (or very elitist).  Where do you stand?

Before you answer, just note that October’s consumer confidence reading dropped to a record low of 38.0 from September’s revised reading of 61.4.  Expectations were for a reading of 51.5.  Discuss .

Bloomberg columnits John F. Wasik recently posted an opinion piece on ‘trickle up’ economics that address the role of small businesses in the context of the presidential election.  Defs worth a read.

Hey! America! That “Bailout”? Not For You! HA HA HA!!!!

How many figures am I holding up, America?

How many figures am I holding up, America?

Well, average Americans (which excludes you, Joe the Plumber), I have some good news and some bad news. The good news? The chance of you getting more credit that will only drive you further in debt has been substantially reduced. Whew!  That was close!  The bad news? That doesn’t include the additional $700 billion you now owe since its been given to a small group of financial industry swells, which doesn’t include you, obvs. Yeah, you can’t win. Say it.

Some guy at the New York Times has let the cat out of the bag. All that jawboning about using Treasury funds to unstick the stuck credit markets in order to help the average American get more in debt is turning out to be little more than b.s. I’m just floored that people still buy the whole notion of trickle down economics – give the rich a lot of money and eventually some of that juice will dribble down their chins and file your glass with a quenching liquid.  Or they’ll just boot you in the head and put you out of their misery.’s Joe Nocera found a way to access the tape of an employee conference call held by JPMorgan and discovered the bank plans to use the $25 billion it pulled down from Treasury to fund acquisitions or some such shit.  Increased consumer loans did not appear to be a significant part of its plan, and by “not significant” I mean not at all, or so Joe the Reporter would have his readers believe.  An this is despite the bank’s recent acquisition of Washington Mutual.  By way of “damning words,” Joe attributes the following quote to the verbose JPMorgan executive:

We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.

So yeah, consider yourself lucky that you dodged that bullet!  No more debt for you, America, because the credit spigots will not be open all that much to spew forth the liquidity that drives your economy.  I mean, no debt except the $250 billion already out the door (10% of which went to JPMorgan) and the remaining $450 billion to be distributed among a few swellegants.

But hey, look at the bright side, at least you won’t have some material possession staring you in the face, reminding you of your recent $700 billion credit binge.  I mean, after all, that’s what you voted for, right America?