LiquidIce said:
The economists are pretty divided, perhaps the package needs to work through the system before its value can be judged?
Of course you are correct on this point. A lot of different factors here. I'm not overly optimistic about this package - on the other hand, due simply to cyles, we will come out of this eventually. Even a few years down the road it won't be simple to judge weather or not the 'stimulus package' had a positive or negative effect.
LiquidIce said:
The inter bank lending rate appears to be settling down a bit which is the first indication that the first obstable to recovery (seized up credit markets) might be overcome. If that doesn't work out there may have to be extreme measures taken to get credit flowing- even down to the government using its new controlling interest in some of the institutions to force them to grant credit to businesses that need it for their regular operations. Certainly no recovery can happen (meaning the spending package will have been for nothing) if credit markets don't unkink.
True. However, this again is a place where philosophies differ. Personally, I come down on the side that the market has to be allowed to work - any government action is likely to just prolong/delay the hardship until such a time that the market can correct itself. I don't have a link - but I found the quotes of the CEO of US Bankcorp interesting. Did everyone see/hear those? He was commenting on the pay restrictions associated with bailout money. He said that the only reason US Bankcorp took bailout money is because they were encouraged to by the government so that they had funds to buy the failing banks (thus eliminating some problems for government). They were supposed to keep quiet about that (since this means the real plan/purpose of the TARP money had nothing to do with Asset relief, but was intended as a loan for healthy banks to buyout unhealthy ones). He said he felt compelled to come out since the government was changing the rules/they wouldn't have taken the bailout money/made acquisiitions if those restricitions had been in place at the time.
LiquidIce said:
Art, I think you'll find Congress is less profligate in future months. This was no ordinary month. Also, the recession you're in now partly goes back to Iraq. The drain of $100+billion a year into operations in Iraq weakened the US economy & pressed the Fed to cut interest rates lower to compensate, which in turn made the housing bubble bigger & built up the current mess. Yes Haliburton got rich but even allowing for that the real cost of the Iraq war is going to be far beyond $700 billion.
I hope you are right regarding Congress. I have to strongly disagree with you regarding the cause. While Iraq may not have helped, this really began with the Fannie/Freddie's policies encouraging home buying amongst those who couldn't afford it - banks were heavily pressured by congress to make loans to those they may otherwise not have. I think tying the housing bubble to Iraq is a real stretch (first time I've even heard of such a theory - but, hey, you can't read everything & another reason these boards/this community is great). Housing prices are still probably at higher levels than they should be. And this plan to help stop foreclosures will only forestall the correction that has to happen. The big problem is: as long a prices at the bottom rung of houses remain too high, the market will remain frozen. Even if higher income people want to sell/etc. Because The housing market is unique in that current owners' new purchases/upgrades are depenedent on selling their current house (theoretically to someone else who will upgrade) - the whole market is in some way tied to the first time buyer - the price level of that level of homes. And that level is still too high in general. Helping the current people who can't afford to pay mortageges stay in their homes only delays the inevitable price correction that needs to occur.