News What are the potential impacts of public confidence on the economy's recovery?

[Astronuc]

Buffett’s Goldman Stake Pays Richly
http://dealbook.blogs.nytimes.com/2009/07/24/buffetts-goldman-stake-worth-91-billion/

Warren E. Buffett showed again why he is known as one of the world's best investors, thanks in part to another prominent investor, Goldman Sachs.

Mr. Buffett's stake in Goldman is now worth $9.1 billion, or about $4.1 billion more than what he paid 10 months ago, according to an analysis by Linus Wilson, an assistant professor of finance at the University of Louisiana at Lafayette.

According to Mr. Wilson's calculations, Mr. Buffett would realize an annualized return of about 111 percent if he sold his Goldman stake, which is held by his conglomerate, Berkshire Hathaway.

In comparison, the federal government received a 23 percent annualized return for its Goldman investment, the bank said after it agreed on Wednesday to pay $1.1 billion to settle warrants the Treasury Department received after injecting $10 billion into the bank in November.

. . . .
Goldman turned to Mr. Buffett in September, seeking a cash injection. In return, Mr. Buffett negotiated what was considered even then to be very favorable terms.

Berkshire Hathaway received perpetual preferred shares in Goldman, which pay a 10 percent annual dividend, or $500 million a year. Berkshire Hathaway also received warrants to buy $5 billion in common stock at a strike price of $115 a share, which could be used at any time within five years of the initial investment.
. . . .

So - Obama should hire Warren Buffett to manage the country's finances?

 

[Ivan Seeking]

New homes sales surged in June to their highest rate this year, according to Commerce Department data released Monday, another sign that the housing market could be starting to stabilize even as prices continue to stumble.

Sales rose 11 percent over the previous month to an annualized rate of 384,000. That was far better than analysts were expecting and the largest monthly gain in nine years...

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/27/AR2009072700967.html?hpid=topnews

I wonder how the Reps will try to put a negative spin on that one!

[Being that this is a physics forum, I should have said spin-down.]

 

[mheslep]

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/27/AR2009072700967.html?hpid=topnews

I wonder how the Reps will try to put a negative spin on that one!

[Being that this is a physics forum, I should have said spin-down.]

I think its great as far as it goes (still down ~23% from last year), and expect most will agree. But if the Dems think this is really that positive, then why not cancel the ~$700Billion left outstanding on the stimulus? Can we agree in the future, again if this is indeed a recovery, that the criticism of the stimulus (mainly that it takes too long to get it out there to do anything) was valid and let's not resort to colossal fiscal stimulus any more.

 

[Ivan Seeking]

I think its great, and expect most will agree. But if the Dems think this is really that positive, then why not cancel the ~$700Billion left outstanding on the stimulus? Can we agree in the future, again if this is indeed a recovery, that the criticism of the stimulus - (mainly that it takes too long to get it out there) was valid and let's not resort to fiscal stimulus any more.

Sure, let's undermine the plan that is working.

Then you can complain about jobs.

 

[mheslep]

Sure, let's undermine the plan that is working.

Then you can complain about jobs.

What's your rationale that 'the plan' is working? And is the economy still lousy or not? Which is it?

Edit: When is fair to complain about 9.5% unemployment and jobs?

 

[Ivan Seeking]

What's your rationale that 'the plan' is working? And is the economy still lousy or not? Which is it?

The plan was designed to address the housing market as well as jobs and future growth. Of course the intial reaction was to prevent the global economy from collapsing, which it did by stabilizing the credit markets. Clearly the economy is improving, and we expect to see it expand next quarter. It is even being announced on many fronts that the recession is over.

Edit: When is fair to complain about 9.5% unemployment and jobs?

Please do! The Republicans obviously left things a bigger disaster than was realized. Once the stimulus money is rolling out in bulk, the job situation should begin to improve.

Of course the Reps would have loved nothing more than to see the money being spent hurriedly and frivolously. Then they could hand Obama his Waterloo [or was that another Waterloo?]

 

[mheslep]

The plan was designed to address the housing market as well as jobs and future growth. Of course the intial reaction was to prevent the global economy from collapsing, which it did by stabilizing the credit markets.

Two different things - TARP related bailouts (which we are largely getting back directly), Fed monetary policy and then the fiscal stimulus bill. The stimulus bill had little or nothing to do with credit markets.

Clearly the economy is improving, and we expect to see it expand next quarter. It is even being announced on many fronts that the recession is over.

Please do! The Republicans obviously left things a bigger disaster than was realized. Once the stimulus money is rolling out in bulk, the job situation should begin to improve.

Ok, if you grant that the 'clearly the economy is improving', and that the stimulus largely hasn't been executed yet, then you agree it can not take credit for improving the economy? Only the TARP/bank bailouts could logically claim that, or other self correction in the economy.

Of course the Reps would have loved nothing more than to see the money being spent hurriedly and frivolously.

No, clearly they didn't want to see it being spent (most of it) at all, because they knew it couldn't be spent in a timely matter.

 

[OmCheeto]

Ok, if you grant that the 'clearly the economy is improving', and that the stimulus largely hasn't been executed yet, then you agree it can not take credit for improving the economy? Only the TARP/bank bailouts could logically claim that, or other self correction in the economy.

It's like having money in the bank. Just because it's there doesn't mean you have to spend it. I think just saying the money was available made everyone happy. The Democrats were sitting on a virtual pile of cash, and the Republicans had something non corporeal to complain about.

 

[Ivan Seeking]

Obama's recovery continues:

Housing Prices Up!

Home prices in major U.S. cities registered the first monthly gain in nearly three years, according to a new report that provided fresh evidence that the severe U.S. housing downturn could be easing.

Standard & Poor's Case-Shiller index, which tracks home prices in 20 metropolitan areas, rose 0.5% for the three-month period ending in May, compared with the three months ending in April. It marked the index's first increase after 34 straight months of decline, and came after a variety of housing indicators has shown glimmers of hope for the past several months...

http://online.wsj.com/article/SB124878477560186517.html

Significantly Improved GDP - Growth Expected Next Quarter

Friday's big news was an update on the health of the economy. U.S. second quarter GDP growth declined 1.0%, which was much better than the 1.7% decline that markets expected. First quarter GDP was downwardly revised to a -6.4% rate from -5.5%, and fourth quarter was revised up to a -5.4% pace from -6.3% previously reported.

Real consumption declined at a 1.2% clip (weaker than expected), after a sharply upwardly revised 0.6% increase in the first quarter. The BEA also reported that real GDP increased 0.4% for 2008, rather than the 1.1% gain previously calculated...

http://www.businessweek.com/investor/content/jul2009/pi20090731_118205.htm

The Stock Market - Up 40% From Low
The DJIA is over 9100; up from its low of about 6500 around March 15th - a 40% increase since the low water mark.

 

[russ_watters]

The GDP was down 1% in Q2 and Obama says the improvement is at least partly due to the stimulus:

The economy contracted at a 1% annual rate in the spring, a strong sign recession is winding down, and President Obama said Friday that it got a boost from the $787 billion economic stimulus program Congress enacted within weeks of his taking office.

http://www.usatoday.com/money/economy/2009-07-31-gdp-economy_N.htm

So how much stimulus money was spent in Q2? Exactly how much of that can we really attribute to it?
[edit] Answer: http://voices.washingtonpost.com/federal-eye/2009/07/eye_opener_july_8_2009.html

GAO estimates that the Treasury Department has paid out approximately $29 billion to states and cities so far this year, about 60 percent of payments estimated for fiscal year 2009, which ends Sept. 30.

Let's say 2/3 of that was in q2 or about $10 billion (sorry, I don't have monthly numbers). Our GDP is about $14 trillion, so that's 0.07% of our GDP. In Q2, the GDP was down 6.5%, so the stimulus was almost exactly 1% of the improvement. The other 99% must then either have happened on its own or been the result of the actions of those in power last year. Either way, it wasn't Obama and the Democratic congress.

 

[russ_watters]

What's your rationale that 'the plan' is working? And is the economy still lousy or not? Which is it?

Edit: When is fair to complain about 9.5% unemployment and jobs?

The best thing about Obama, to his supporters, is that he's a great talker. He says things they want to hear. When he made his unemployment prediction a few months ago, complete with that pretty graph, the effect of the stimulus sounded great. It didn't matter that nothing on that graph had anything to do with reality. But here we are 6 months later and Democrats are still talking the same way! It doesn't matter to the True Believers that Obama simply has no clue what the economy is doing or how to fix it (or even if it needs him to fix it).

But to everyone else, in 2012, it just might.

 

[Office_Shredder]

The GDP was down 1% in Q2 and Obama says the improvement is at least partly due to the stimulus: http://www.usatoday.com/money/economy/2009-07-31-gdp-economy_N.htm

So how much stimulus money was spent in Q2? Exactly how much of that can we really attribute to it?
[edit] Answer: http://voices.washingtonpost.com/federal-eye/2009/07/eye_opener_july_8_2009.html Let's say 2/3 of that was in q2 or about $10 billion (sorry, I don't have monthly numbers). Our GDP is about $14 trillion, so that's 0.07% of our GDP. In Q2, the GDP was down 6.5%, so the stimulus was almost exactly 1% of the improvement. The other 99% must then either have happened on its own or been the result of the actions of those in power last year. Either way, it wasn't Obama and the Democratic congress.

It should be obvious the argument is that the stimulus, y'know, stimulated the economy. I.e. got people not receiving economic stimulus funds to spend more money, or even just encouraging the people who did get those funds to spend more than just that money. Your argument that the stimulus package can only contribute to the economy its face value is wrong.

 

[mheslep]

Obama's recovery continues:...

Yes Help Us Obi Wan Obama, You're Our Only Hope

 

[mheslep]

It should be obvious the argument is that the stimulus, y'know, stimulated the economy. I.e. got people not receiving economic stimulus funds to spend more money, or even just encouraging the people who did get those funds to spend more than just that money.

Why? Because Obama signed a piece of paper with 'stimulus' written on it and announced it with fan fair on the news? Because some guy two states away got some money, I'll go out and spend more? This essentially argues that the government can just announce "I stimulate you, I stimulate you, I stimulate you" three times and we'll all go out and spend more. This was the second recent stimulus by the way. The first one, the Bush 2008 stimulus, was ~http://www.msnbc.msn.com/id/22725498/" One could go argue, as we hear now, that the 2008 money kept things from getting worse, it 'saved X jobs', but I am not buying it.

A reasonable assumption based on cause and effect, is that the sometimes stumbling actions of Bernanke, Paulson, Geitner[1] and the TARP guarantee money from 2008 through now eventually stabilized the banks and credit markets. So though the free fall has stopped, it is quite possible credit won't get much better, as lenders now have a valid fear that their loans will inflated away given the run away spending.

[1] Geitner I'm less sure of, as he calculated the best way to sell his own long sitting house was http://gregmankiw.blogspot.com/2009/07/some-people-wont-accept-price-cuts.html"

 

[Ivan Seeking]

Obama's recovery continues:

The cash for clunkers program a raging success!
https://www.physicsforums.com/showthread.php?t=328229

 

[russ_watters]

It should be obvious the argument is that the stimulus, y'know, stimulated the economy. I.e. got people not receiving economic stimulus funds to spend more money, or even just encouraging the people who did get those funds to spend more than just that money. Your argument that the stimulus package can only contribute to the economy its face value is wrong.

So...then what is the point of the $700 billion? Are you saying that the point of the stimulus wasn't to spend money to stimulate the economy but was to cause people to stimulate it themselves via cheerleading?

Should I point out that that's not what Obama or his supporters (see poster above me) claimed was going on?

 

[rootX]

So...then what is the point of the $700 billion? Are you saying that the point of the stimulus wasn't to spend money to stimulate the economy but was to cause people to stimulate it themselves via cheerleading?

Should I point out that that's not what Obama or his supporters (see poster above me) claimed was going on?

I don't see them rejecting that argument either. The only point of the government injections is to
(1) create confidence and
(2) give economy a tiny push

1 and 2 are not mutually exclusive.

 

[russ_watters]

I don't see them rejecting that argument either. The only point of the government injections is to
(1) create confidence and
(2) give economy a tiny push

1 and 2 are not mutually exclusive.

Indeed, they are not mutually exclusive, but republicans are contributors to the economy too - bigger contributors than democrats, I would suspect. And his plan to spend $700 billion doesn't give them confidence, it scares them. So if this was all a trick, he at least half succeeded: he was able to trick democrats and republicans like into thinking that he really intended to spend $700 billion, instead of this "tiny" amount. But as a result of that trick, democrats got confidence and republicans got convinced he didn't know the first thing about economics.

So that doesn't even make Obama a good cheerleader.

And could we clarify this, please: do you and Office Shredder believe that Obama never intended to spend that money?

 

[russ_watters]

Obama's recovery...

I suppose with that stance, you would also give Bush credit for turning the biggest crash in the stock market since 1929 into the softest recession we've ever had? You believe Bush prevented another great depression in 2001, right?

 

[OmCheeto]

All of my stocks, bonds, and funds are in the black.
Of course, without the market collapse, I'd have never been interested in the first place, and would probably have gone to my grave without having ever directly invested a penny.

Has anyone else noticed that stock prices seemed unreasonably deflated over the last 8 months, and decided to pump money in?

 

[Skyhunter]

Indeed, they are not mutually exclusive, but republicans are contributors to the economy too - bigger contributors than democrats, I would suspect. And his plan to spend $700 billion doesn't give them confidence, it scares them. So if this was all a trick, he at least half succeeded: he was able to trick democrats and republicans like into thinking that he really intended to spend $700 billion, instead of this "tiny" amount. But as a result of that trick, democrats got confidence and republicans got convinced he didn't know the first thing about economics.

So that doesn't even make Obama a good cheerleader.

And could we clarify this, please: do you and Office Shredder believe that Obama never intended to spend that money?

Republicans follow economic indicators just like Democrats.

It is not the stimulus that is scaring the Republicans... it's the noise machine.

 

[kasse]

Will somebody answer my questions in the liberalism thread more thoroughly?

 

[Ivan Seeking]

So...then what is the point of the $700 billion?

Jobs, infrastructure, energy conservation, expansion of programs like wind power, future growth to help reduce the ratio of debt to GDP.

Why is it that Republicans always seem willing to do nation-building everywhere but here in the US?

For a nice review of the progress and who gets the credit,
http://abcnews.go.com/thisweek

Their main veiwer isn't working yet for me, but you can select the individual segments at the top of the page, beginning with Geitner.

 

[Ivan Seeking]

It is also interesting to note that when Bush took over, our debt to GDP ratio was at about 60%. Under Bush it rose to about 78% with a nearly vertical ascent during the last part of his Presidency, and now the Republicans are complaining that it will go above 80% under Obama - the guy who was handed an economy spiralling out of control and about to collapse.

The hypocrisy is beyond belief!

 

[Office_Shredder]

Indeed, they are not mutually exclusive, but republicans are contributors to the economy too - bigger contributors than democrats, I would suspect. And his plan to spend $700 billion doesn't give them confidence, it scares them. So if this was all a trick, he at least half succeeded: he was able to trick democrats and republicans like into thinking that he really intended to spend $700 billion, instead of this "tiny" amount. But as a result of that trick, democrats got confidence and republicans got convinced he didn't know the first thing about economics.

So that doesn't even make Obama a good cheerleader.

And could we clarify this, please: do you and Office Shredder believe that Obama never intended to spend that money?

Democrats and Republicans have nothing to do with it. We're talking about generic people here. If Obama spends more government money, more money is being spent. This is fact. This is undeniable. If more money is being spent, more people are being paid. Fact. If more people are being paid, more people can then spend their own money. And the cycle continues.

Somehow you seem to have confused Obama's confidence boosting for the economy with political maneuvering

 

[mheslep]

Democrats and Republicans have nothing to do with it. We're talking about generic people here. If Obama spends more government money, more money is being spent. This is fact. This is undeniable. If more money is being spent, more people are being paid. Fact. If more people are being paid, more people can then spend their own money. And the cycle continues.

Somehow you seem to have confused Obama's confidence boosting for the economy with political maneuvering

Office_S, Obama is not the great and powerful Oz. The money has to come from somewhere. Where do you think that is? Consider the logic of your argument: If spending in and of itself was all that was needed to create a bigger economy, then we could simply have the government spend us all into vast wealth. Visibly it doesn't work that way.

 

[Office_Shredder]

Office_S, Obama is not the great and powerful Oz. The money has to come from somewhere. Where do you think that is? Consider the logic of your argument: If spending in and of itself was all that was needed to create a bigger economy, then we could simply have the government spend us all into vast wealth. Visibly it doesn't work that way.

That's fine, but has nothing to do with political affiliation. A small business owner whose getting paid more because one of his clients received stimulus funding isn't going to say "Well, I'm a Republican, so I'm going to burn this cash in my backyard"

We're not talking about how he got the stimulus passed, or the political ramifications of it, we're talking about the effects of the stimulus on the economy. You still haven't demonstrated where political affiliation comes into play for this

 

[russ_watters]

Jobs, infrastructure, energy conservation, expansion of programs like wind power, future growth to help reduce the ratio of debt to GDP.

It doesn't matter how many times how many people say it: He barely spent any money, so the stimulus could not possibly have made a significant difference yet. Every effect needs a cause and he did virtually nothing to cause the improvements seen over the past two months.

All this turnaround shows us is that his stimulus spending isn't necessary and should be cancelled.

Why is it that Republicans always seem willing to do nation-building everywhere but here in the US?

Why do democrats only complain about deficit spending when it is a Republican doing it?

There is nothing wrong with doing some infrastructure. There is nothing wrong with promoting wind power. But to disguise those as "economic stimulus", when they really just are his pet projects that he wanted whether there was a recession or not is dishonest. Obama was given a blank check when he got into office due to with recession and he's going to do his best to spend as much as he can, regardless of if what he's doing is what is best for the economy.

It is also interesting to note that when Bush took over, our debt to GDP ratio was at about 60%. Under Bush it rose to about 78% with a nearly vertical ascent during the last part of his Presidency, and now the Republicans are complaining that it will go above 80% under Obama - the guy who was handed an economy spiralling out of control and about to collapse.

The hypocrisy is beyond belief!

Should I pull out more of your quotes from the past few years where you talk about the deficit/debt being too high? Look in the mirror, Ivan!

And by the way - how can you possibly believe any of Obama's economic predictions when his unemployment prediction was way off, just a month after he made it? And the GAO says his numbers on the debt are just rediculous. But I guess reality can't get in the way of your beliefs.

Also, the "vertical ascent"? That's the financial bailout last year. And guess what: we're getting that money back! So it's a pretty misleading picture we get from that graph you like to post. Obama is just plain spending money. Bush was investing it. Yeah, turning a profit wasn't of high importance, but the odds are good his spending will turn a profit. Obama's is pure debt, like he put it on a credit card.

 

[russ_watters]

Republicans follow economic indicators just like Democrats.

And indicators follow improvements - so Republicans and Democrats still have to make the improvements happen before the indicators will show them.

It is not the stimulus that is scaring the Republicans... it's the noise machine.

Says you. I am a Republican and I'm very nervous about doubling our national debt. The ironic thing is that we had lots of threads about the national debt over the past few years and most of the democrats on this forum were worried about Bush's spending too! The inconsistency is telling - this forum is full of partisans; reality be damned.

 

[russ_watters]

All of my stocks, bonds, and funds are in the black.
Of course, without the market collapse, I'd have never been interested in the first place, and would probably have gone to my grave without having ever directly invested a penny.

Has anyone else noticed that stock prices seemed unreasonably deflated over the last 8 months, and decided to pump money in?

Unfortunately, I didn't have any to put in except for my 401K, but yeah, at the beginning of the year, I really wanted to dump a lot in. After the crash last fall, the stock market was severely undervalued.