Economics

Get Ready for Some Economic Stimulus…

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With stock sell-offs and Euro crashes. Typical story:

Dow futures fell 553, or 4.57 percent, to 11,553. Standard & Poor's 500 index futures fell 67.20, or 5.07 percent, to 1,258.10. Nasdaq 100 index futures dropped 86.50, or 4.68 percent, to 1,763.00.

In Asia, Japan's Nikkei stock average closed down 5.65 percent—its biggest percentage drop in nearly a decade. Hong Kong's Hang Seng index lost 8.65 percent a day after showing its biggest losses since the Sept. 11, 2001, terrorist attacks.

In afternoon trading, Britain's FTSE 100 fell 0.69 percent, Germany's DAX index lost 2.55 percent and, France's CAC-40 fell 1.39 percent.

Some of the more modest moves in major global indexes Tuesday belie the huge drops many saw Monday.

A big question on investors' minds is whether the Federal Reserve, scheduled to meet next week, will make an emergency interest rate cut before then. Traders outside the U.S. were pondering whether other central banks would step in with interest-rate cuts to help shore up market sentiment.

More here.

Which leads to the inevitable followup. To wit: 'Stimulus' is the word as economy turns into focus of presidential race.

And the prez hisself is already touting a $150 billion (or therabouts) stimulus package.

In 2006, reason asked, "Can we bank on the fed?"

NEXT: Iraq 2011

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  1. Q: What to do when the economy has a sale?
    A: Buy.

  2. STOP SPENDING ASSHOLES

  3. so which new bubble will the latest round of interest rate cuts produce?

    I’m buying FCOJ on margin!!!

  4. I’m buying FCOJ on margin!!!

    Excellent choice!

  5. IT’S THE ECCONOMY, STUPIDS!!!

  6. Get Ready for Some Economic Stimulus…

    Get ready for some more inflation. Oh wait – only Paultards and assorted nutcases would call it that.

  7. *rings doorbell, door opens, revealing scantily clad woman*

    Hello ma’am, did you order a stimulus package? You can have it now, or after it starts inflating.

  8. Edwards seem to be the only one not talking about helicopter money.

    If I get a check, it’s going right on the Citi card.

  9. The Fed cuts rates by .75%

  10. It looks like “stimulus” is the new “change”.

  11. Gold’s up to $873/oz. I keep telling myself I’m going to buy, but then I forget about it, and the next time I look the price went down and I’m like, “good thing I didn’t buy gold.”

  12. Can someone explain what is going on in idiot talk for me? And tell me what I should do with my pay-check?

  13. If I get a check, it’s going right on the Citi card.

    This is precisely what I was talking to someone about the other day. People have already spent their rebate checks.

  14. If I get a check, it’s going right on the Citi card.

    Gold, shotgun(s), and ammo. Though the last two might be a problem if I wind up going to grad school in IL.

  15. Can someone explain what is going on in idiot talk for me? The collapse of the real estate market and the foreclosures have hurt the markets and sent us into recession.

    And tell me what I should do with my pay-check?

    Cash it.

  16. .75% cut this morning.

  17. THE URKOBOLD IS SELF-STIMULATING HIS ECONOMY. OH, YEAH.

  18. The US economy is headed into recession. It must be about time to “borrow” some money and order some more bombs from the military-industrial complex. What’s that you say – we already have lots of bombs? Well we’ll just have to use those up. How? Hell, I don’t know; drop them on somebody – doesn’t a regime need changing somewhere? How about a surge or something?

  19. “If I get a check, it’s going right on the Citi card.”

    Thus, the money goes to the banks, the banks sure up their bottom line and the politicians can claim to have helped the workin’ man.

  20. INSERT RE-BATING JOKE HERE, VIKING MINION.

  21. So, let’s see…

    Way back in the late 90’s the Fed’s loose monetary policy spawned the mother of all stock market bubbles, featuring internet startup companies with no real business plans or revenue streams being valued at billions of dollars. The basic principles of prudent business valuation were thrown out the window.

    But that bubble burst, so the Fed responded by adding liquidity and easing monetary policy…

    Then in the early 2000’s, the Fed’s loose monetary policy spawned the mother of all housing loan bubbles, featuring McMansions being bought on zero-down, cash-back, negative-amortization, variable-rate, NINJA (No Income, No Job, no Assets) mortgages. The basic principles of prudent lending were thrown out the window.

    But that bubble burst, so the Fed responded by adding liquidity and easing monetary policy…

    Care to place any bets on what comes next?

  22. Care to place any bets on what comes next?

    It sounds like “investment automobiles” are making a comeback.

    I can’t stand to watch that Barrett Jackson idiocy for more than a minute or two at a time; in a cumulative eight minutes or thereabouts, I heard the phrase, “this car will never be worth less than it is right now” enough times to scare the bejesus out of me.

  23. Thus, the money goes to the banks, the banks sure up their bottom line and the politicians can claim to have helped the workin’ man.

    How is helpin’the workin’ man pay off his credit card not, you, know, helpin’ the workin’ man?

    Money always finds its way back to some bank somewhere anyhow. That’s just how it works.

  24. But that bubble burst, so the Fed responded by adding liquidity and easing monetary policy…

    Care to place any bets on what comes next?

    Uh, a reduction in the purchasing power of the dollar? Four-dollar-a-gallon gasoline a year from now? And all to keep the house of cards built by the stock market and the financial establishment from collapsing. Why do I feel the same way I did that time when I discovered my pockets had been picked?

  25. How is helpin’the workin’ man pay off his credit card not, you, know, helpin’ the workin’ man?

    But what about the “workin’ man” who was frugal and saved his money instead of spending it before it was even earned? His money just became worth less because of this expansion of credit – if I understand things correctly.

  26. How is helpin’the workin’ man pay off his credit card not, you, know, helpin’ the workin’ man?

    Quite right, and if the policy goal is to help people in bad economic conditions, that might be one way to do it.

    But there’s nothing stimulatory about paying off debt, and people are talking about this as a sort of Keyensian thingamajig.

  27. smartass sob,

    I’ll note that the last round of helicopter money – the Bush 2001 tax rebate check – was followed by years of low inflation.

  28. I’ll note that the last round of helicopter money – the Bush 2001 tax rebate check – was followed by years of low inflation.

    Only if you define inflation as an increase in the consumer price index or something. Even at that the dollar doesn’t buy but about one half to two thirds what it bought when Bush first took office.

    Where did you get that term “helicopter money” – I’ve never heard it before. Why is it called that?

  29. smartass sob,

    Bernanke pledged a while back that if the economy was in trouble, he’d drop money from helicopters to save it. He’s subsequently been known as Helicopter Ben.

  30. I believe, but cannot guarantee, that the “helicopter” imagery originated with Jimmy Carter (as a descriptive analysis of his policies).

  31. he’d drop money from helicopters to save it. He’s subsequently been known as Helicopter Ben.

    LMAO! Geez, guy, give a little warning – this damned coffee is hot!

  32. Money from helicopters is fine. Just no turkeys, for the love of God, no turkeys.

  33. “Helicopter money” refers to the inane belief that inflating the money supply harms no one. If everyone gets the new money at the same time (dropped from a helicopter), then there are no delitorious effects to inflation.

    But people don’t get the money at the same time. The banks get it first and loan it out. Thus it tends to go to capital production first, which creates a boom. This is a distortion because consumption patterns have not changed. Eventually it busts. We’re seeing this with the housing burst and stock tumbles. If Bush/Bernanke would just leave it alone, a correction would happen and we could move on. But by preventing the corrective effects of the bust, they will only prolong it.

  34. As God is my witness, I thought turkeys could fly!!!

  35. Actually, the metaphor of “helicopter drops” of cash predates Carter–it might even have been Milton Friedman who came up with the idea.

    But no, it won’t do any good. I don’t know what will, beyond investors actually having to absorb their losses, write off bad loans and take the consequences of their own bad decisions (viz. financing the construction of houses Americans didn’t need and couldn’t afford), and as soon as possible.

    (A few criminal indictments for fraud would be nice too.)

    At best this’ll only protract the agony. At worst it’ll put yet more pressure on the greenback as foreign investors are handed billions more reasons to be sick to the back teeth of importing US inflation. Lots of those helicopters are headed straight for China and the Middle East.

    If it’s any consolation, the Canadian dollar has come down in the last little while, along with the price of oil; it’s at about US97c. So you can all make fun of the loonie again.

  36. Milton Friedman used the helicopter metaphor as far back as 1969 in “The Optimum Quantity of Money and Other Essays”. Maybe there is a use of the term that pre-dates this though.

  37. These panicky new stories are so overblown:
    * Taking the S&P 500 as an example, it has had a 5-year growth of about 13%. Smart investors don’t buy into stock index funds with anything less than a 5-year time horizon.
    * As jackanapestarian pointed out, price dips are an opportunity to buy.
    * The pundits always have to state a reason that the market took a dip. They have no way of actually knowing the reason or reasons, so they are just blabbering.

  38. But what color are the helicopters?

  39. Taking the S&P 500 as an example, it has had a 5-year growth of about 13%.

    If you take inflation into account it’s probably not so good.

  40. From Yahoo Finance:

    Date Dow Gold/oz Ratio of Dow to Gold
    1/22/02 8736.59 282.05 30.975
    1/22/08 12099.30 890.40 13.589

  41. Argh, it messed up my spacing. Basically, the ratio of the Dow Index to price of an ounce of gold has dropped from 30.975 to 13.589 during that time.

  42. Good point, crimethink. That the price of gold has risen way higher than the S&P 500 in the last 5 years is a news story worthy of lots of attention.

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