The Know Nothing Party’s only important constituency: the richest 340,000 Americans.
Number of currently unemployed, discouraged, and forced part-time American workers: 25 million.
Number of nonfarm payroll jobs created last month: 80,000.
Number of years until all those who want to work can: 26.
Number of political and Fed leaders who actually give a damn: 0.
Gorilla says: “Numbers, unlike leaders, don’t lie!”
So long as unemployment claims remain above 400K/week, and economic growth remains not very much above population growth, the US is looking at a decade or more of stagnation.
Gorilla says: “Add in the political paralysis, and you get depressed when considering the lesser depression!”
The Genius has some ideas to help with the housing problem!
But they’re all classic early Obama Administration “don’t rock the boat too much or we’ll get blamed” ideas.
Rather than being truly radical in dealing with a disaster, half measures are adopted which only make everyone angrier.
On housing, there’s a need for reality:
1) Prices are still at least 10-15% too high relative to the 100 year trend. Any policy that doesn’t start with an acknowledgement of that fact is not a serious policy.
2) Banks are not being forced to mark their bad loans to market. This creates the impression that all is well, or will be if we wait another 10 years, but the fact remains that the banks are largely bust and sitting on piles of cash. With little demand in the economy, and little incentive to engage in lending, the situation only gets worse.
3) The federal government isn’t using its leverage to get meaningful changes across. Like it or not, the GSE’s are 95% of the mortgage market now. They should be engaging in massive refinancing, cramdown, i.e. principal reductions, and buying up lots of bad loans from the banks (or the Fed should substantially increase its balance sheet and do so). So long as this doesn’t happen, the GSEs are little more than the even poorer sisters of the banks.
4) There should also be greater promotion of renting and greater promotion of housing for the unemployed. We need to stop subsidizing home ownership over a 10-20 year period. Alas, if subsidies go, prices are likely to fall further, but that makes home ownership truly affordable.
5) Get the Fed to give everyone some free money to encourage spending and get the Treasury to print some money and start hiring people.
Gorilla says: “A house may be a home, but it’s not a good investment!”
Unemployment claims: remain above 400K!
And there’s nothing at all being done to address the problem.
The President’s jobs programs is woefully inadequate.
The housing depression and consumer deleveraging remains unaddressed.
The Fed’s not dropping money out of helicopters, unless it’s over heliports belonging to the banks.
The Know Nothing Party remains perfectly content, as they have in the past, to destroy the US economy if that’s the path back in power.
Gorilla says: “Our country is a depressing failure!”
One of the most important parts of getting through the latest economic disaster is to encourage a much higher inflation target.
There is zero evidence that the markets are worried in any way about inflation; long bond rates are at the lowest level in decades.
Higher inflation will make it easier and faster to deleverage debts.
The target should be 5% until unemployment drops below 7%.
Instead, what we’re getting is a refusal by elites in the US and Europe to do anything about unemployment.
It’s absolutely amoral, and it’s absolutely stupid.
Gorilla says: “Warm up the helicopters, give people not banks some free money, stop the idiocy of austerity, get some stimulus projects going: voila, no more lost decade!”
Unemployment claims remain way too high, and the Fed’s less than robust assistance (and negative outlook) does not bolster confidence in the US economy.
$400 billion sounds like a lot, but the output gap’s over $2 trillion, so, like the President’s jobs “plan”, this is a woefully inadequate response to what increasingly looks like an economic disaster.
Our leaders are failing us, in Washington and around the world.
Gorilla says: “We need to join the Greeks, on the streets demanding real solutions!”
While our leaders do nothing!
What’s needed is large scale stimulus (at least $1 trillion/year for the next 2 years) to create a large-scale jobs program (to hire at least 10 million unemployed Americans).
The Fed will try to lower prices on credit, which may have a stimulative effect.
It should, but probably won’t until November, raise the inflation target to at least 4%.
It should also be thinking seriously about directly setting up a means to get money into people’s pockets, without the need for a deadlocked Congress.
But what’s lacking in the economy is demand.
The private sector is sitting on boatloads of cash and has very little incentive to expand, regardless of the cost of credit.
So unemployment will remain high, and could well go higher in the absence of sensible fiscal policy.
The President’s also got to do a lot more. He has very little chance of being reelected in 2012 if the economy remains at or below where it is today.
Deficit reduction should be off the table for at least 2 years.
The Executive Branch should take the TARP money and leverage it into creating an infrastructure bank.
The GSEs should be refinancing underwater mortgages for the millions of homeowners who are still making payments.
These are the things that should be done and do not require Congress.
Gorilla says: “Dysfunction and disaster need not be self-fulfilling prophecies!”
1) Propose a woefully inadequate jobs program that at best hires only about 10% of the currently unemployed.
2) Propose $3 trillion in spending cuts and tax increases at a time when the output gap is $2 trillion and rising.
3) Presume that your key supporters will come out in droves, particularly if the other party nominates a complete clown.
It’s fine to propose things for the sake of appearing different, but doing nothing about the economy for another 12 months guarantees that unemployment will rise and you will indeed lose the election.
Gorilla says: “Barry used to be a smart guy, now he’s a defeated President walking!”
Unemployment claims: now above 425K!
Inflation: non-existent!
Interest rates: record lows!
Austerity: destroying economic growth!
What’s needed: a massive jobs program, a massive stimulus program, and a higher inflation target!
What’s on offer: absolutely nothing!
Not one head of state in a developed country is pursuing a sensible economic policy.
Gorilla says: “The mistakes are in office, over and over again!”
Gilding The Lilies Of The American Playing Field:
46 million Americans in poverty
49 million Americans without health insurance
412 Americans worth a billion or more
Which group gets the highest priority from our political leaders?
Gorilla say, “Why, the 400, of course, just as they did in the Gilded Age!”
