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Obama "owns" the economy now.
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| Shakka |
Right or wrong, insightful comments from Tom Gallagher at ISI today:
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Earlier in the year White House political advisers and many analysts thought voters would give Obama a year before they held him responsible for the performance of the economy. (That is a key reason so many administration officials use the adjective "inherited" in talking about the economy.) Pollster Mark Blumenthal thinks voters' perception of the economy is what has brought Obama's approval rating down (from around 60% to the mid-to-high 50s). If that's true, then Obama and congressional Democrats "own" the economy now.
Blumenthal cites three polls on the economy or general assessments of the status quot that turned more negative, all coinciding with the drop in Obama's polls. One is the standard "right direction, wrong track" question many pollsters ask. Another is Pew's question, are you "hearing mostly good news about the economy these days, mostly bad news about the economy or a mix of both good and bad news." In December the "mainly bad news" answer was 80%, but it fell to 30% in May before climbing more recently. Then there is the CBS question on what direction the economy is taking, and that pattern mirrors the Pew result.
Holding a new president responsible for the economy's performance 6 months into his term may seem to soon (and is shorter than polls had indicated earlier in the year), but it's what happened to Reagan as well. His approval in July '81 was right where Obama's is now, but it fell below 50% by year-end and bottomed around 36% in early 1983. |
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| Krypton |
Dow Jones Industrial Index
Obama Inauguration Day (Jan 20, 2009) = 7,949
Yesterday's Index Close = 8,711
Percentage Change = 9.5%
That's all I care about. |
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| Shakka |
| quote: | Originally posted by Krypton
Dow Jones Industrial Index
Obama Inauguration Day (Jan 20, 2009) = 7,949
Yesterday's Index Close = 8,711
Percentage Change = 9.5%
That's all I care about. |
Good for you, even though that has very little to do with this thread topic. The stock market does not equal the economy. Fwiw however, I think more people care about unemployment.
Unemployment on 1/31/2009: 7.5%
Unemployment at 6/30/2009: 9.5%
Percent change: 26.67%
Don't even ask about the U6 Underemployment rate. |
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| ziptnf |
| The auto industry had been crashing and burning prior to Obama getting into office, and GM didn't file for Bankruptcy until last month. Job losses have been increasing for well over two years, just because of the massive losses the economy has endured. Banks, auto industry, real estate, travel industry. They're all linked, and job losses reflect the economy. With these kind of punches, how does a president stop the bleeding so quickly? You can't, unless you invest in clean energy jobs that won't be shipped overseas, and revamp the auto industry. |
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| Shakka |
| The point isn't that he's trying or not, or that it is or isn't his fault. The point is that public opinion is reflecting that people no longer care to hear about "inherited" problems and will start to attribute more and more responsibility to Obama as results occur(or not). The pollsters are clear to say that 6 months probably isn't a fair amount of time to give him to pass judgment, but public opinion is what it is (and the author points out the similar obstacle that Reagan also faced). |
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| jerZ07002 |
| quote: | Originally posted by Shakka
The point isn't that he's trying or not, or that it is or isn't his fault. The point is that public opinion is reflecting that people no longer care to hear about "inherited" problems and will start to attribute more and more responsibility to Obama as results occur(or not). The pollsters are clear to say that 6 months probably isn't a fair amount of time to give him to pass judgment, but public opinion is what it is (and the author points out the similar obstacle that Reagan also faced). |
the unfortuante part of all this is the ignorance of the public in thinking the president has that much power over the broader economy. At most, the president helps shape policy, but has little control over actual employment numbers, stock market performance, or other broad statistical bases. |
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| Krypton |
| quote: | Originally posted by Shakka
Good for you, even though that has very little to do with this thread topic. |
It does because we'r talking about the economy.
| quote: | | The stock market does not equal the economy. |
It's the best real-time measure of economic sentiment and performance over anything else.
| quote: | Fwiw however, I think more people care about unemployment.
Unemployment on 1/31/2009: 7.5%
Unemployment at 6/30/2009: 9.5%
Percent change: 26.67%
Don't even ask about the U6 Underemployment rate. |
And you're going to nail Obama down for an unemployment down-trend that started in 2007. Nice.. |
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| Shakka |
| quote: | Originally posted by Krypton
It does because we'r talking about the economy.
It's the best real-time measure of economic sentiment and performance over anything else. |
That is a foolish statement at best. I guess you're a believer in the Efficient Markets Hypothesis.
| quote: | | And you're going to nail Obama down for an unemployment down-trend that started in 2007. Nice.. |
I did the exact same thing you did. Since Obama took office, the market market is up 9.5%. Since Obama took office, the unemployment rate is up 26%. I fail to see the problem. I mean that is really pretty ignorant of you. If the economy is improving so much, as your statement would imply, then why does unemployment continue to increase?? And why does Obama tell us that the unemployment rate will continue to increase if things are getting so much better?
Perhaps you don't understand exactly what is causing stocks to move higher right now. Great editorial in the WSJ yesterday on the topic.
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The Bernanke Market
We won't get real growth until Congress and Treasury get policy right.
By ANDY KESSLER
I remember once buying the stock of a small company and I couldn't believe my luck. Every time my fund bought more shares the stock would go up. So we bought even more and the stock kept climbing. When we finally built our full position and stopped buying the stock started dropping, ending up at a price below where we started buying it. We were the market.
Just about every policy move to right the U.S. economy after the subprime sinking of the banking system has been a bust. We saved Bear Stearns. We let Lehman Brothers go. We forced Merrill Lynch, Wachovia and Washington Mutual into the hands of others. We took control of Fannie and Freddie and AIG and even own a few car companies, pumping them with high-test transfusions. None of this really helped.
[Commentary]
We have a zero interest-rate policy. We guaranteed bank debt. We set up the Troubled Asset Relief Program (TARP) to buy toxic mortgage assets off bank balance sheets. But when banks refused to sell at fire sale prices, we just gave them the money instead. Dumb move. So we set up the Public-Private Investment Program to get private investors to buy these same toxic assets with government leverage, and still there are few sellers. Meanwhile, the $1 trillion federal deficit is crowding out private investment and the porky $787 billion stimulus hasn't translated into growth.
At the end of the day, only one thing has worked -- flooding the market with dollars. By buying U.S. Treasuries and mortgages to increase the monetary base by $1 trillion, Fed Chairman Ben Bernanke didn't put money directly into the stock market but he didn't have to. With nowhere else to go, except maybe commodities, inflows into the stock market have been on a tear. Stock and bond funds saw net inflows of close to $150 billion since January. The dollars he cranked out didn't go into the hard economy, but instead into tradable assets. In other words, Ben Bernanke has been the market.
The good news is that Mr. Bernanke got the major banks, except for Citigroup, recapitalized and with public money. June retail sales rose 0.6%. Housing starts jumped 17% month to month in May and will likely be flat for June. Second quarter GDP may be slightly up. And he was successful in spreading a "green shoots" psychology throughout the media. But the real question is, now what? Government interventions are only meant to light a fire under the real economy and unleash what John Maynard Keynes called our "animal spirits." But government dollars can't sustain growth.
Like it or not, the stock market is bigger than the Federal Reserve and the U.S. Treasury. The stock market anticipates only future profits and prosperity, not government-funded starter fluid. You can only fool it for so long. Unless there are real corporate profits from sustainable economic growth, the stock market is not going to play along. It's the ultimate Enforcer.
In mid-May, Mr. Bernanke's outlook seemed to change. Maybe he didn't approve of the sharp housing rebound -- like we need more houses! Maybe he saw inflation in commodity prices -- oil popping to $72 from $35. Or, more likely, he finally realized that he was the market and took his foot off the money accelerator, as evidenced in the contracting monetary base (see nearby chart). Sure enough, things rolled over -- the market dropped 7.5% from its peak, oil prices dropped almost 17%, and even gold has lost some of its luster. But in July, the Fed started buying again and the market rallied.
Can the U.S. economy stand on its own two feet without Mr. Bernanke's magic dollar dust? Eventually, but apparently not yet. Unemployment stubbornly hit 9.5% in June, according to the Bureau of Labor Statistics. Housing prices are still dropping, albeit at a slower pace, and foreclosures are still rampant.
But I think what really bothers the market is that the structural problems that got us into trouble in the first place still exist. We took the easy way out and, with the help of Treasury Secretary Tim Geithner's loose "stress tests," swept banking problems under the carpet. We waved off mark-to-market accounting and juiced bank stock prices to help them recapitalize, but all those toxic mortgage assets on bank balance sheets are still there as anchors on lending. All the pump priming and stock market flows didn't get rid of them.
Hats off to Mr. Bernanke for getting the worst behind us. He'll be pressured politically to keep pumping out dollars, but he should resist the urge. The stock market will ignore his dollars if it doesn't believe they'll turn into real profits. Green jobs and government health-care clerks do not make a productive, sustainable economy. That can only come from innovative companies with access to growth capital. The stock market won't turn bullish until it sees that type of economy.
Again, when it's clear that you are the market you have to stop buying and begin tackling the hard stuff. By not restructuring banks, by not getting bad loans off bank balance sheets, by not standing up to the massive increases in government debt crowding out private capital, the Fed and Treasury are holding back real economic growth.
Mr. Kessler, a former hedge-fund manager, is the author of "How We Got Here" (Collins, 2005).
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| Krypton |
| quote: | Originally posted by Shakka
That is a foolish statement at best. I guess you're a believer in the Efficient Markets Hypothesis. |
Hardly, I make my money off the Inefficient Market Hypothesis. Unemployment is a lagging indicator. I'm talking about a real-time measure of economic performance. I believe the market can be efficient and inefficient at differing times. Right now, it's more efficient because it has fallen more towards an equilibrium value, not too low, not too high.
| quote: | | I did the exact same thing you did. Since Obama took office, the market market is up 9.5%. Since Obama took office, the unemployment rate is up 26%. I fail to see the problem. |
You're nailing a down-trend that started way before the current administration, on the current administration. That is the problem. |
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| Shakka |
| quote: | Originally posted by Krypton
Hardly, I make my money off the Inefficient Market Hypothesis. Unemployment is a lagging indicator. I'm talking about a real-time measure of economic performance. I believe the market can be efficient and inefficient at differing times. Right now, it's more efficient because it has fallen more towards an equilibrium value, not too low, not too high.
You're nailing a down-trend that started way before the current administration, on the current administration. That is the problem. |
See edit above. Market performance is not being driven by economic improvement (yet). It is being driven by massive liquidity injections.
And also, I'd suggest you read the topic and starter of this thread real hard to get the point of this thread. |
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| Krypton |
| quote: | Originally posted by Shakka
See edit above. Market performance is not being driven by economic improvement (yet). It is being driven by massive liquidity injections.
And also, I'd suggest you read the topic and starter of this thread real hard to get the point of this thread. |
All I'm saying is high unemployment shouldn't be blamed on Obama. About the Tom Gallagher thing you posted. Yea, pretty insightful, maybe I assumed too much, thinking it was a blame article or something.
The market is up for a variety of reasons including the one you mentioned. But when we're talking about the economy and the president's policies, the first indicator I go to is the stock market, before anything else. |
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| Q5echo |
| quote: | Originally posted by Krypton
All I'm saying is high unemployment shouldn't be blamed on Obama. |
b-b-but...the things...the things he said? what about his words? i want him to f**k in my earhole with those words again, dayummm:( |
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