Not even the NYT can avoid reporting that on the last trading day in October, the Dow Jones dropped like it was pole-axed, completely erasing yesterday’s 2% gain, while other financial indexes posted a monthly loss for the first time in 7 months. Consumers still seem skittish despite news the Economy grew by 3.5% in the 3rd quarter. How can we grow like that and still have major issues with the Economy?
The Times reported the drop in Consumer spending was “tied to the end of the government’s cash-for-clunkers program, which gave car buyers thousands of dollars in vouchers for the purchase of new vehicles.” I would add to that the end of the Government’s program to give money to home buyers. I call it cash-for-condos.
It’s hard not to note this is what Administration critics predicted. Stimulus plans costing taxpayer billions have not produced a recovery. There are only blips here and there as people take advantage of “free government money” (read “tax dollars taken from someone else and given to them”, remember Joe the Plumber?). After Cash for Clunkers and Cash for Condos produced their false positives the Economy retreated to a more accurate picture of consumer confidence.
The Times also noted “The drops were led by stocks in banks and financial firms …” Yet just just a month ago this Economic sector was posting record profits. The Times failed to remind readers what the Government did in that sector. President Obama told some in the financial sector they could no longer pay their employees as they saw fit and called for a maximum wage when it comes to CEOs. Administration members ominously said they hoped the rest of the industry would voluntarily comply with the new wage structure.
Investors took one look at the President’s plan and bolted with their cash. Investors put cash in firms headed by those making millions seeking a good ROI from the plans and minds worth that sort of money. Investors rightly understand their return is jeopardized in the hands and minds of lesser corporate leaders. People who understand Economics told the President this would happen. They were ignored and, for their trouble, they were pilloried as racists.
The Times reports the most important facts in two separate paragraphs. They note “The revival of the consumer sector is considered paramount in turning the United States economy around, since purchases by consumers make up about two-thirds of the nation’s spending” shortly after revealing “Consumer spending in September dropped by the largest amount in nine months …” When the false positives of Cash for Clunkers and Cash for Condos are stripped away, consumer spending is getting worse, not better. What’s more, the rate of decline is escalating. After 9 months of Stimulus, consumer spending had its worst month in September.
The only question now is how long the administration will pimp failed New Deal era policies to solve the economic problems of another century. Perhaps if Barack Obama took time from date nights, golf games, begging for the Olympics and disrespecting Constitution and Liberty loving Americans to pay serious attention to the Economy he’d realize the only “economic boom” he’s likely to experience will come from the Economy imploding on his watch.
For Liberty!
Ken
Tags: Economic Recovery, Economy, Stock Market
Ken Marrero
Ken has blogged personally at Blue Collar Muse since 2006, founded the Tennessee ConserVOLiance in 2007 and serves as ALA's Director of Grassroots Outreach and Coalitions.
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Ken,
Why did the investors leave equities in Oct 2008?. These high paid CEO’s were, in part, responsible for the decisions that drove the Government to bail out the financial sector to begin with.
Why do we keep rewarding failure..Shouldn’t CEO’s also be responsible in the the same way average Americans are when they don’t do a good job?
I don’t think we just need salary caps, I think we need to fire any CEO who puts thier company in a position to be bailed out by the Government.
People worry that this “talent” is going to go elsewhere? I say good riddance!
CEO/Worker Compensation ratio:
The U.S. stood first in the world in 2005 with a ratio of 39:1 CEO’s compensation to pay of manufacturing production workers. Britain second with 31.8:1; Italy third with 25.9:1, New Zealand fourth with 24.9:1.[13]
I mean 39:1! Unless these CEO’s can turn lead into gold, I don’t think they are worth it..
Why is this type of weath distribution OK? God forbid if we ask these people to work for less than a million a year..How can anyone be productive on such a paultry sum?
It’s pathetic…The freedom you talk about and Capitalism is all about F@#$ing the little guy and I’m sick of it.
We live in a Corporatocracy Ken…The thing you should be protesting isn’t just Taxes…Or blaming Obama for the countries ills…Where were you guys when President Bush was deficit spending us into oblivion, on our two Vietnams (Iraq and Afghanistan)…Where were the conservatives? Too busy doing the unconscious flag wave? YOU DIDN’T KNOW THAT THESE WARS WERE GOING TO COST US? GIVE ME A BREAK!
Where were the conservatives when Sen Phil Gramm introduced the laws that sowed the seeds for the financial meltdown…
This one:
http://en.wikipedia.org/wiki/Commodities_Futures_Modernization_Act
and that:
http://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act
We need to get rid of undue Corporate influence on our government…We don’t have a Gov by the people for the people…If you haven’t noticed.
Nick
Ken,
Your article seems to measure the economy by the success of the stock market. As an investment manager, I can tell you that the market moves more on emotion and less on data. There is nothing to conclude from a 2% down day other than there were more sellers than buyers.
“President Obama told some in the financial sector they could no longer pay their employees as they saw fit”. I can see you don’t like the idea of capping salaries. Understand that the money we have given them has done nothing but insulate the banks from reality. If you don’t do something, ie cap wages, you only encourage them to repeat the past.
Look at Goldman Sachs. This organization borrowed 28 billion from the fed discount window at 0-.25% to ‘pay-back’ the TARP which was yielding around 5%. There are no strings attached to this money which was put to work in
propritary trading, where GS makes 80% of its earnings. It probably made somewhere between 1 and 2 billion on 0% loan from the taxpayers. How did they respond? By reserving $700,000 per person in bonuses as though they earned it without any help. It made Is this what you really want.
We probably agree that what the government is doing is actually counter-productive. If I have a criticism of your writing it is that you have no solutions of your own. And while you criticize Obama’s initiatives, you don’t go into why his policies will fail.