What happened
President Bush said this week he was open to taking additional steps to stimulate the flagging economy, amid new indications that the U.S. is sliding into a deep recession. A slew of downbeat earnings reports and a steep jump in unemployment claims convinced policymakers and investors alike that the financial crisis had extended beyond Wall Street and was battering the “real economy.” The Bush administration reversed itself and voiced support for a new economic stimulus package, as did Federal Reserve Chairman Ben Bernanke. Congressional Democrats quickly got to work producing a $300 billion package with new infrastructure spending, unemployment benefits, and Medicaid assistance to states. Congress plans to hold a special session after the election to take up the legislation.
Following a stock market rally that reflected widespread relief that the credit crisis was easing, stock indexes plunged as corporations reported dramatically lower sales and earnings. Construction equipment giant Caterpillar called the economic contraction “the worst we’ve seen in years.” Internet portal Yahoo! announced it would lay off 1,500 workers, and thousands of other layoffs were announced by Merck, PepsiCo, and other companies. “This is an equal-opportunity recession,” said Cathy Paige of temporary-staffing supplier Manpower. “Everyone is feeling it.”
What the editorials said
The Fed chairman knows which way the wind is blowing, said The Wall Street Journal. With a Barack Obama presidency looking increasingly likely, “Bernanke all but submitted his job application” to Obama by endorsing the interventionist, Democratic approach to fiscal “stimulus.” A “tougher” Fed chairman would refrain from “meddling in campaign tax-and-spending debates” right before an election, but Bernanke has opted for self-interest over principle.
Washington’s inclination to intervene is admirable, said USA Today, but the public would be better served if policymakers let the recession play out. It may sound “harsh,” but “recessions are as necessary to prosperity as are recoveries.” Growth can resume only after the economy is purged of its excesses. There’s room for limited steps to ease the downturn’s impact on the most at-risk Americans, but expensive new programs that add to the soaring deficit “could do more harm than good.”
What the columnists said
Welcome to “the Great Incomprehensible Recession of 2008,” said Steven Weisman in The New Republic. “The only thing easy to understand” about the mess we’re in is that panic is everywhere, from the stock exchange to the halls of Congress. Nearly everything else is comprehensible only to “a priesthood of experts.” As Washington moves beyond short-term fixes to consider long-term reforms, the first priority “must be to make the entire global financial system more transparent, comprehensible, and accountable.”
Too bad that’s not the Democrats’ main concern, said James Capretta in National Review Online. The stimulus measures that the Democrat-led Congress will take up in November represent the first step backward toward “the failed liberal policies of the 1960s.” Those policies, with their “large expansions of federal entitlements and explicit efforts to redistribute income,” will foster dependence on government and stifle initiative and innovation.
Washington has its priorities, I have mine, said Warren Buffett in The New York Times. And that’s to “buy a slice of America’s future at a marked-down price.” One rule has guided all my investment decisions: “Be fearful when others are greedy, and be greedy when others are fearful.” Right now, fear is coursing through the markets, knocking down the prices of some of the world’s soundest companies to levels not seen in decades. Those companies “will be setting new profit records five, 10, and 20 years from now.” I’m positioning myself now to share in those profits, and so should you.
What next?
President Bush said this week that he’ll host an economic summit, beginning on Nov. 15, at which leaders of the world’s biggest economies will consider coordinated efforts to combat the global slowdown. The announcement cheered European leaders, “who’ve already forced the U.S. hand on key design elements of the financial rescue effort that’s currently underway around the world,” said John D. McKinnon in The Wall Street Journal. European leaders are “hoping that a politically weakened Bush administration will be more likely to accept their ideas at the summit.”
Showing posts with label Recession of 2008-09. Show all posts
Showing posts with label Recession of 2008-09. Show all posts
Friday, October 31, 2008
Friday, July 18, 2008
Economic gloom spreads to Wall Street
What happened
Wall Street officially entered a bear market last week, in the midst of a number of gloomy signs for the U.S. economy. The Dow Jones Industrial Average closed more than 20 percent below its October peak, meeting the commonly accepted definition of a bear market. “It’s a validation that all hell has already broken loose,” said economist Keith Hembre. The sell-off was partly a reaction to skyrocketing energy costs, as oil hit a record high of $144.15 a barrel and a gallon of gas reached a national average of $4.11. Last month’s stock drop was the market’s worst June performance since the Great Depression.
The Labor Department reported that 62,000 people lost their jobs in June—the sixth straight month of job losses and the longest such period since 2002. Sales of new homes also dropped precipitously. Acknowledging that the credit crunch is not abating, the Federal Reserve this week extended a program to provide struggling investment banks with low-interest loans and readied new rules to restrict high-cost loans to people with poor credit. Fed Chairman Ben Bernanke said he now believes the economic slowdown will extend well into next year.
Economic issues dominated the presidential campaign. John McCain pledged to jump-start the economy by cutting taxes and balancing the federal budget within four years through spending cuts. Barack Obama said McCain’s approach would help only “big corporations and multimillionaires,” and he renewed his call for a $50 billion stimulus package for working families that includes a taxpayer rebate.
What the editorials said
“The economy has shifted into reverse,” said The New York Times. The 438,000 jobs lost this year won’t come back until consumer confidence improves, and that won’t happen as long as the housing crisis continues. The Fed’s moves could help, but Congress needs to stop playing politics and pass a foreclosure prevention bill. If Washington doesn’t act soon, “things will get worse before they get better.”
McCain’s policy of “competitiveness, prudence, and growth” is just what the doctor ordered, said National Review. It was heartening to hear him revive his promise to balance the federal budget, and he’s right that it can be done without raising taxes, as long as wasteful spending is targeted. But first, “he must get elected,” and he’ll have a hard time doing that unless he offers direct benefits to the middle class, such as their own tax cut.
What the columnists said
McCain’s economic plan is dependent on “a vast number of ‘magic asterisks,’” said Ed Kilgore in Salon.com. To make his numbers work, he promises undefined “reviews” of federal programs and, most laughably, counts the money we’ll save from achieving “victory” in Iraq and Afghanistan. Not that it matters—since the entire policy is built around private-sector-oriented reforms in health care, energy, and entitlements that no Democratic Congress would ever agree to. McCain isn’t making a serious proposal, he’s just trying to shore up the Republican base.
If you believe that any president “will instantly reverse the decline of housing prices, bring gasoline prices crashing back to earth, and generally kick the economy back into gear,” said Daniel Gross in Slate.com, “I’ve got some subprime mortgages I’d like to sell you.” History shows that the economy expands and contracts according to cyclical factors beyond any leader’s control. About the only thing a president can affect is “the short-term national mood about the economy.”
That mood is gloomier than it needs to be, said Chris Lester in The Kansas City Star. The 5.5 percent unemployment rate is nothing compared to the 10.8 percent peak of 1982, and our 4.2 percent inflation is dwarfed by 1980’s high of 14.76 percent. Even the housing crisis doesn’t really affect many ordinary people who bought their homes to live in, rather than as part of some “highfalutin” investment scheme. “It sometimes seems like we’ve completely forgotten what hard times really feel like.”
What next?
Wall Street rallied in response to the Federal Reserve’s actions and a slight decline in crude oil prices. But most analysts expect any recovery to be slow. Historically, it takes investors more than three years to recoup their losses after a bear market, said Adam Shell in USA Today. The current market is really only “a cub bear. The question now is whether the slide will turn into a grizzly bear.”
Wall Street officially entered a bear market last week, in the midst of a number of gloomy signs for the U.S. economy. The Dow Jones Industrial Average closed more than 20 percent below its October peak, meeting the commonly accepted definition of a bear market. “It’s a validation that all hell has already broken loose,” said economist Keith Hembre. The sell-off was partly a reaction to skyrocketing energy costs, as oil hit a record high of $144.15 a barrel and a gallon of gas reached a national average of $4.11. Last month’s stock drop was the market’s worst June performance since the Great Depression.
The Labor Department reported that 62,000 people lost their jobs in June—the sixth straight month of job losses and the longest such period since 2002. Sales of new homes also dropped precipitously. Acknowledging that the credit crunch is not abating, the Federal Reserve this week extended a program to provide struggling investment banks with low-interest loans and readied new rules to restrict high-cost loans to people with poor credit. Fed Chairman Ben Bernanke said he now believes the economic slowdown will extend well into next year.
Economic issues dominated the presidential campaign. John McCain pledged to jump-start the economy by cutting taxes and balancing the federal budget within four years through spending cuts. Barack Obama said McCain’s approach would help only “big corporations and multimillionaires,” and he renewed his call for a $50 billion stimulus package for working families that includes a taxpayer rebate.
What the editorials said
“The economy has shifted into reverse,” said The New York Times. The 438,000 jobs lost this year won’t come back until consumer confidence improves, and that won’t happen as long as the housing crisis continues. The Fed’s moves could help, but Congress needs to stop playing politics and pass a foreclosure prevention bill. If Washington doesn’t act soon, “things will get worse before they get better.”
McCain’s policy of “competitiveness, prudence, and growth” is just what the doctor ordered, said National Review. It was heartening to hear him revive his promise to balance the federal budget, and he’s right that it can be done without raising taxes, as long as wasteful spending is targeted. But first, “he must get elected,” and he’ll have a hard time doing that unless he offers direct benefits to the middle class, such as their own tax cut.
What the columnists said
McCain’s economic plan is dependent on “a vast number of ‘magic asterisks,’” said Ed Kilgore in Salon.com. To make his numbers work, he promises undefined “reviews” of federal programs and, most laughably, counts the money we’ll save from achieving “victory” in Iraq and Afghanistan. Not that it matters—since the entire policy is built around private-sector-oriented reforms in health care, energy, and entitlements that no Democratic Congress would ever agree to. McCain isn’t making a serious proposal, he’s just trying to shore up the Republican base.
If you believe that any president “will instantly reverse the decline of housing prices, bring gasoline prices crashing back to earth, and generally kick the economy back into gear,” said Daniel Gross in Slate.com, “I’ve got some subprime mortgages I’d like to sell you.” History shows that the economy expands and contracts according to cyclical factors beyond any leader’s control. About the only thing a president can affect is “the short-term national mood about the economy.”
That mood is gloomier than it needs to be, said Chris Lester in The Kansas City Star. The 5.5 percent unemployment rate is nothing compared to the 10.8 percent peak of 1982, and our 4.2 percent inflation is dwarfed by 1980’s high of 14.76 percent. Even the housing crisis doesn’t really affect many ordinary people who bought their homes to live in, rather than as part of some “highfalutin” investment scheme. “It sometimes seems like we’ve completely forgotten what hard times really feel like.”
What next?
Wall Street rallied in response to the Federal Reserve’s actions and a slight decline in crude oil prices. But most analysts expect any recovery to be slow. Historically, it takes investors more than three years to recoup their losses after a bear market, said Adam Shell in USA Today. The current market is really only “a cub bear. The question now is whether the slide will turn into a grizzly bear.”
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