February 25, 2009
2009-2-25: The markets
dropped a little over 1% today.
to close at 1,425,.
and the S&P
to end at 765.
up a bit at $42.50
a barrel, and gold fell back to $966.00.
Mark Hulbert has published this spine-chilling,
heart-warming article: Extending the Great Depression analogy.
In the article, he observes that the stock market hit its 50% level in
December, 1930, about 13 months after the Crash of '29. Over the next five
months, it dropped another 60%, meaning that by May, 1931, the Dow stood
at 20% of what it did at its peak of 381 in the summer of '29, or about
76. However, two years later, by June, 1933, the Dow was above where it
had been in December, 1930, and five years later, it had climbed on
average 7% a year real rate of return (allowing for the deflation that
occurred during the Depression) from its 50% point in December, 1930.
Paul Krugman has penned several pieces since yesterday,
Permanent Link to Mysterious plans,
ponders the inscrutability of the government's bank plans.
Permanent Link to What should government
do: A Jindal meditation, refers to Republican spokesman Bobby Jindal
ridiculing the volcano- monitoring funding in the Administration's
stimulus package last night. Dr. Krugman points out that monitoring of
volcanoes for public safety is in the same league as maintaining a Weather
Bureau to warn of impending hurricanes or other severe weather. He wirites,
leaving aside the chutzpah of casting the failure of his own party’s
governance as proof that government can’t work, does he really think
that the response to natural disasters like Katrina is best undertaken by
uncoordinated private action? Hey, why bother having an army? Let’s just
rely on self-defense by armed citizens.
intellectual incoherence is stunning. Basically, the political philosophy
of the GOP right now seems to consist of snickering at stuff that they
think sounds funny. The party of ideas has become the party of Beavis and
the President’s zombies, he quotes other economists who also see the
government's approach being that of pandering to bank shareholders (the
banking lobby) at the taxpayer's expense. He concludes,
and more, it looks as if we’re headed for the decade of the living dead."
Permanent Link to Not much stress,
concludes that the "adverse
for the bank stress test isn't very adverse... a conclusion also reached
by the Wall Street Journal.
Permanent Link to Happier news,
notes that the Administration's health care plan looks as though it isn't
quite enough to pay for all that's required "but
it’s not ridiculously short, either".
Permanent Link to Turning Japanese,
quotes the expert on Japan's lost decade's impending Congressional
guarantees that the US government has already extended to the banks in the
last year, and the insufficient (though large) capital injections without
government control or adequate conditionality also already given under
TARP, closely mimic those given by the Japanese government in the
mid-1990s to keep their major banks open without having to recognize
specific failures and losses. The result then, and the emerging result
now, is that the banks’ top management simply burns through that cash,
socializing the losses for the taxpayer, grabbing any rare gains for
management payouts or shareholder dividends, and ending up still
undercapitalized. Pretending that distressed assets are worth more than
they actually are today for regulatory purposes persuades no one besides
the regulators, and just gives the banks more taxpayer money to spend
down, and more time to impose a credit crunch.
kind of half-measures to keep banks open rather than disciplined are
precisely what the Japanese Ministry of Finance engaged in from their
bubble’s burst in 1992 through to 1998 …"
Galbraith: Stimulus not enough (video).
Fewer large employers plan layoffs, survey says.