Will Obama fix the economy?

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I saw the DJIA at 7,040 today. This time last year it was over 10,000, as it had more or less been for several months.
So, if you want a quick snapshot of the current health of America's economy, it's 7/10ths as productive as it was a year ago.

Every one of Obama's announcements of a yet another bailout deal drives stocks sharply down, I've noticed, which really makes a lot of sense: America's ailing capitalist system is being treated with extreme government spending. Obviously, this does not engender confidence on the part of the capitalistic investors, so, down goes the Dow.

My question is, how is Obama's faulty decision pattern likely to change? His diagnosis of the continuing dramatic downturning of the economy at the point of each of his announcements of a new ~$1,000,000,000,000 bailout package is that government is not spending our tax dollars fast enough on itself, and that, therefore, kicking this very high spending on government institutions and failing businesses into an even higher gear is somehow going to fix the economy.
The reason, in his opinion, that our economy is failing is because government hasn't had a good, all-out, multi-trillion-dollar, blitz spending spree of our tax dollars in quite a while.

This is just mystifying.

Does he look at evidence from outcomes -- the financial reactions to his announcements -- or is this all merely blind acting-out of his internal philosophy until success is somehow reached?

His former ubiquitous campaign slogans of "Hope" and "Change" have now turned into simply "We will recover", and he doesn't even say it very convincingly.

Last edited by Ragtime on 27 Feb 2009, 3:41 pm, edited 1 time in total.

One person can not "fix" the economy, no matter who they are. Obama seems to be employing some very well-educated advisers who will hopefully help him in ensuring that the current recession is less bad than it could be. We will recover from it eventually, but it will not be because of Obama, nor will it be in spite of him. Obama personally has very little real control over the economy, and can only make an existing situation temporarily somewhat worse or somewhat better. Hopefully it will be the latter.

Also, looking just at stock prices as an indication of the health of the economy is probably not the most accurate view. Stocks don't always reflect the strength of the economy (they sure didn't in 1928) and besides that, we've seen some deflation recently so stock prices would be expected to be lower.

On the one hand, several indicators a couple of weeks ago moved in the opposite direction of the stock market.

On the other hand, as far as I can tell, the Obama administration is the Dow's worst enemy.

Don't confuse the value of stock with productivity. The stock market is a legal casino. Except for the sale of new stock to raise capital the stock market does not add a nail, a screw or a BTU to the economy.

ruveyn

HE won't. Like most Pols, Chicago or otherwise, He personally pays for very little - including errors in judgement or policy.

One thing's for certain, regardless of the economic outcome, unless Washington DC is beset by pesants weilding torches & pitchforks & set ablaze, Barry & Co will be largely unaffected.

It's the rest of us who get screwed.

So the Dow is just coincidentally in tune with the Recession we're in?

I wouldn't take it too lightly. Last week's bank selloff may not have meant anything in terms of fundamentals, but the hammering health care stocks are taking in light of the Obama budget is something to take note of.

Whoa. Dow closed at 7062 today. Day-um! How low can it go? Predictions anyone? It can't sustain these kinds of drops forever; in good old bear market fashion, I would predict some big rallies next week (triple digit). But then after last week I would have expected the same this week

Place your bets ladies and gents!

Is It Any Wonder The Market Continues To Sink?

<via www.ibdeditorials.com >
http://www.ibdeditorials.com/IBDArticle ... 7936229029

Last Oct. 13, in trying to explain why the market had sold off 30% in six weeks, we acknowledged that the freeze-up of the financial system was a big concern. But we cited three other factors as well:
Read More: Economy

• The imminent election of "the most anti-capitalist politician ever nominated by a major party."
• The possibility of "a filibuster-proof Congress led by politicians who are almost as liberal."
• A "media establishment dedicated to the implementation of a liberal agenda, and the smothering of dissent wherever it arises."
No wonder, we said then, that panic had set in.
Today, as the market continues to sell off and we plumb 12-year lows, we wish we had a different explanation. But it still looks, as we said four months ago, "like the U.S., which built the mightiest, most prosperous economy the world has ever known, is about to turn its back on the free-enterprise system that made it all possible."
How else would you explain all that's happened in a few short weeks? How else would you expect the stock market, where millions cast daily votes and which is still the best indicator of what the future holds, to act when:
• Newsweek, a prominent national newsweekly, blares from its cover "We Are All Socialists Now," without a hint of recognition that socialism in its various forms has been repudiated by history — as communism's collapse in the USSR, Eastern Europe and China attest.
Even so, a $787 billion "stimulus," along with a $700 billion bank bailout, $75 billion to refinance bad mortgages, $50 billion for the automakers, and as much as $2 trillion in loans from the Fed and the Treasury are hardly confidence-builders for our free-enterprise system.
• Talk of "nationalizing" U.S.' troubled major banks comes not just from tarnished Democratic Sen. Chris Dodd, chairman of the Senate Finance Committee, but also from Republicans like Sen. Lindsey Graham of South Carolina and former Fed chief Alan Greenspan.
To be sure, bank shares have plunged along with home prices, and many have inadequate capital. But is nationalization really the only solution for an industry whose main product — loans to consumers and businesses — has expanded by over 5% annually so far this year?
• A stimulus bill laden with huge amounts of spending on pork and special interests is the best our Congress can come up with to get the economy back on track. Economists broadly agree that the legislation has little stimulative power, and in fact will be a drag on economic growth for years to come.
The failure to include any meaningful tax cuts for either individuals or small businesses, the true stimulators of job growth, while throwing hundreds of billions of dollars at profligate state governments and programs — such as $4.2 billion for "neighborhood stabilization activities" and $740 million to help viewers switch from analog to digital TV— has investors shaking their heads.
• A $75 billion bailout for 9 million Americans who face foreclosure, regardless of how they got into financial trouble, is the government's answer to the housing crunch. Many Americans who have scrupulously kept up with payments are steaming at the thought of subsidizing those who've been profligate or irresponsible.
With recent data showing that as much as 55% of those who get foreclosure aid end up defaulting anyway, a signal has been sent that America has gone from being "Land of the Free" to "Bailout Nation."
• Energy solutions ranging from the expansion of offshore drilling and the development of Alaska's bountiful arctic oil reserves to developing shale oil in America's Big Sky country, tar-sands crude in Canada and coal that provides half the nation's electric power, are taken off the table.
The market knows full well what drives the economy and that restraining energy supply will make us all poorer and investing less profitable. Taking domestic energy sources off the table makes us more reliant on sources from hostile and unstable regimes, breeding uncertainty in a capital system in which participants seek stability.
• Lawmakers who seem more interested in pleasing special interests than voters back home now control Congress. Some of the leading voices in crafting the massive bank bailout and stimulus packages — including Sen. Chris Dodd, Rep. Barney Frank and House Speaker Nancy Pelosi — were the very ones who helped get us in this mess.
They did so by loosening Fannie Mae and Freddie Mac's lending rules and pushing commercial banks to make bad loans. Both Dodd and Frank were recipients of hefty donations from Fannie, Freddie and other financial firms they were charged with regulating.
• Trade protectionism passes as policy, even amid the administration's lip service to free trade. Congress' vast stimulus bill and its "Buy American" provisions limit spending to U.S.-made products and will drive up costs, limit choices and alienate key allies.
Already, it has triggered rumblings of retaliation in a 1930s-style trade war from trading partners, just as the Smoot-Hawley tariffs prolonged the Great Depression. Several European partners have begun raising barriers. Meanwhile, three signed free-trade pacts with Colombia, Panama and Korea languish with no chance of passage. Free trade offers one way out of our problems, yet it's been sidetracked.
• A 1,000-plus page stimulus bill is bulled through Congress with no GOP input and not a single member of Congress reading it before passage. It borders on censorship.
GOP protests of the bill's spending and the speed it was passed at were dismissed by Obama and other Democrats as seeking to "do nothing" or "breaking the spirit of bipartisanship." But voters are angry.
Along with thousands of angry phone calls to Congress, new Facebook groups have emerged, and street protests have sprung up in Denver, Seattle and Mesa, Ariz., against the "porkulus." CNBC Chicago reporter Rick Santelli's on-air denunciation of federal bailouts for mortgage deadbeats attracted a record 1.5 million Internet hits.
• Business leaders are demonized. Yes, there are bad eggs out there like the Madoffs and Stanfords. But most CEOs are hugely talented, driven, highly intelligent people who make our corporations the most productive in the world and add trillions of dollars of value to our economy.
They don't deserve to be dragged before Congress, as they have been dozens of times in the past two years, for a ritual heaping of verbal abuse from the very people most responsible for our ills — our tragically inept, Democrat-led Congress.
• Words like "catastrophe," "crisis" and "depression" are coming from the mouth of the newly elected president, rather than words of hope and optimism. Instead of talking up America's capabilities and prospects, he talks them down — the exact opposite of our most successful recent president, Ronald Reagan, who came in vowing to restore that "shining city on a hill."
Even ex-President Clinton admonished Obama to return to his previous optimism, saying he would "just like him to end by saying that he is hopeful and completely convinced we're gonna come through this."
• The missile defense system that brought the Soviet Union to its knees, and which offers so much hope for future security, is being discussed as a "bargaining chip" with Russia. This, at the same time the regime in Iran is close to having a nuclear weapon and North Korea is readying an intermediate-range missile that can reach the U.S.
This sends a message of weakness abroad and contributes to a feeling of vulnerability at home. A strong economy begins and ends with a strong defense.
All this in barely a month's time. And to think that more of the same is on the way seems to be sinking in. Investors are watching closely and not caring for what they see. Sooner or later, the market will rally — but not without good reason to do so.

First of all, the idea of "government by dow-jones index" is not very wise. The market responds to many things, yet ragtime seems to suggests that it is only words from the Whitehouse that can have any effect.

Second, Reagan came into office with a recession, and the market went down after his inaugural speech and through the first months of his stimulus package (tax cuts and borrow/spend). Yet if you talk to a conservative, they will say it was effective and eventually led to a recovery. And so will most liberals, because cutting taxes and spending money (even if the government has to borrow it) is generally recognized by economists to have a stimulatory effect on the economy.

4th quarter growth for 2008 was just recalculated as a contraction of 6.2 percent, not 3.8%. Toxic mortgages are still toxic. Exports from Japan dropped by 50% in January. This is a serious situation. I realize that the conservatives are trying to pin the collapse on Obama (even though it started before he came into office) and they are eager to declare defeat if there is not an instant miracle. But the majority of the American public is smart enough not to fall for such a con.

You can't dodge this that easily monty. Anticipated actions from the White House have been cited as reasons for several *bad* trading days; the obvious example (and the only one I happen to have been tuned into Bloomberg during ;P) was the bank selloff late last week, where the general consensus was that in fact it was largely due to talk about nationalizing the banks, and the market has specifically reacted positively when that has been said to be unlikely. Yes, the Obama administration may not be the *only* enemy of the Dow, but at this point *shockingly enough* the class of people most connected to this is not responding well to the Obama administration. That may be something we're all just going to have to live with, but don't act like they haven't played a part in this.

Mere words and opinion.



Actually, the people that are leading the Congress (the Democrats) are more liberal than the Congress is overall. Think about it .... the Democrats are not conservative like the Republicans.



Nonsense. The media varies in its coverage, and the right wing-nuts like to attack the credibility of anything in print that they disagree with. So they dismiss the vast liberal media conspiracy and mint their own facts.



No, people can still start businesses and make money. There are still markets. But across the world, the banks and hedge funds have mucked things up, and other people are paying a price.



It didn't happen in a few short weeks - it has been building to this over several years.




Lending to many consumers and businesses dropped dramatically last year, so a "5% increase" is good, but doesn't indicate a healthy financial sector. Many of the largest banks may become insolvent, and will have to go into receivership, or be 'nationalized' or 'restructured'.



No, economists don't agree on this. Many feel that the bill will stimulate the economy, but that compared to the size of the problem, it is not enough. Many economists believe that a deflationary collapse would do more to slow economic growth over the next decades.



Yes, and as Kenneth the Page demonstrated, the Republicans hate volcano research, hurricane research, tornado research, and other measures which can create jobs and protect people and reduce future losses.



Not true. People who were massively irresponsible will not be saved. There is no way Joe the Part-Time Walmart Clerk will stay in his $400,000 home when he brings home only $800 a month. The bill only helps those who got in slightly above their head, and who can make payments if the loan is redone at a better rate.



Sexy Sarah got people to chant "Drill, Baby, Drill" but when the price of oil dropped to $40, the oil company executives started chanting "Shut those Mutha-Fu@cking drill rigs down before I lose my bonus!! !" It's not just Democrats - the free market also ridicules Republican mantras.



The 'buy-American' provision was protectionism. It would be bad if it was a big part of the bill, or if it ignited waves of international retaliation.




Only to someone who does not grasp the idea of what censorship is.

At a managerial/executive level, no one ever knows all the details - it is impossible. Congress works by knowing things like spend more or spend less, more money for this, less money for that.



Sure, some people will not be happy. But pleeeease dont exagerate and make it sound like most people are completely unhappy - most support the current administration, even if the medicine is not always palatable. And since when is 1.5 million internet hits a record? A record in whose book?



Most CEOs have not been dragged in front of Congress to get a ritual verbal flogging. The CEOs of the financial institutions and US car companies have .... but their companies are teetering on bankruptcy, so maybe it is not unwarranted??



Nonsense. He is both realistic about the current situation and optomistic about the future. I know that is a complex concept and some people can't quite grasp it, but it is true.




The fear of that missile system drove the Soviet Union to overspend - but the technology is not proven or robust. Most of the tests involved shooting down a single dummy missile whose path was known in advance. Similar things were seen with the Patriot missile in Gulf War I - amazing claims were made and it provided a psychological boost, but careful analysis after the war showed the missile defense system was close to worthless.

In the long run, a stock price is reasonably correlated to the value of the company. In the short run, not so much. Especially now -volatility has been ridiculous for a while, and the bad financial news is fast and furious.

So do you honestly believe that if a president was in that made no changes, the market would not be in just as bad shape, or much worse?? I'm not arguing that Obama's policy has been perfect ... merely that the cause of the collapse and the current base level of the markets are not related to the past month of Whitehouse policy.

If you think that some other course of action would be better, pray tell, what is that course?

So let me get this straight: you think that the further collapse of the market another thousand points back down to the levels seen at the low lows of the crisis last year, amidst wide speculation on the dangers of certain hostile government actions being cited as reasons for the collapse and (in the case of the banks) little change in the fundamentals has nothing to do with the White House? I mean, sure, the market is volatile, but the 65 day moving averages for the primary indexes had more or less leveled off until a few weeks ago. Something has definitely happened over the past few weeks; this isn't just volatility. Volatility was the triple digit swings down and up that occurred during the worst of it last year. The past three weeks have seen a definite downward trend. Among other things: investor sentiment is not doing so well, and the administration isn't helping. Maybe the market will correct itself in the weeks to come, but in the meantime that poor sentiment is doing damage.


I'm not a policy maker; I just call it like I see it.

The economy will NOT fix itself overnight, nor will it happen by magic.

It will happen slowly and gradually.

The economy is cyclic if it comes around when he is in office he will reap the rewards if not the consequences. Nothing he does will really have any affect on when it gets better