Friday, January 27, 2012

Where's the boom?

“Austerians” have argued that all the government spending has been “crowding out” the private economy. Well, here is gov’t spending collapsing at the fastest rate in 40 years and we’re growing at a measly, 0.8% (when you take out inventories).


Matt Franko said...

GDP report this morning (4th qtr 2.8% BIG DEAL!) although positive was not very good.

Jives with what you were saying the other day Mike, 4th qtr up a bit but 3rd was 1% and so was 2nd in the 1% range....

Now what?

1qtr '12 off to a shitty start with govt at debt ceiling for first 3 weeks... that should go away today.

Now with $1.2T of ceiling ahead of them (previous raisings of only $400B and $500B which makes Treasury tentative to begin with) perhaps Treasury will open their wallet and start net spending in earnest...

We'll see, knowing these morons, they will want to keep a lid on net spending to keep the deficit as low as possible heading into the elections this year...


Tom Hickey said...

The public is convinced that the government is like a big household, so politicians are afraid to be seen as not doing anything about rising public debt and federal deficits, even if they know better. No one is daring to stand up and explain how this works.

The Fed chair is politically independent, so it is arguably his job to do so, and Bernanke has said enough to show that he realizes that fiscal injection is required. But he is reluctant to speak out, ostensibly because this involves fiscal policy, which exceeds the Fed's purview. Crazy.

Matt Franko said...


From Bernanke just the other day:

"Chairman Bernanke: Well, as you know, Federal Reserve makes it a
policy to try to avoid commenting on specific individual tax and
spending programs and I don't have those numbers at hand in any case.
But what I would say is the following, is that what I've tried to convey to Congress and I think many other economists have taken the same view, is that responsible fiscal policy has at least two
components at this point. One is of course importantly to achieve
fiscal sustainability
. And to achieve fiscal sustainability over a long period of time we need to be acting soon, now would be
[Ed: ?!?!?!?!?], to making credible commitments to reducing spending, to improving our programs, to modifying or simplifying our tax code.... blah, blah blah...."

Bernanke is hopeless. I dont see what you are seeing.... he is a big part of the problem.


Mike Norman said...


+1.9% contribution from inventories
+0.3% contribution from autos

Strip out both and we're growing at 0.5%. Looks like Q1 could even be negative.

Tom Hickey said...

I am not claiming he has anything right but the realization that monetary policy cannot affect UE and so it should be removed from the Fed's mandate to prevent confusion. BB knows that fiscal is required but he is terrified of the IGBC that he sees looming like a bogeyman under the bed that will come out as soon as it gets dark. Of course, he is a moron, but at least he is not a complete simpleton and does realize the difference between monetary and fiscal. Most of the rest don't get this and think that the Fed can do magic with monetary policy. Now the Fed's magic wand is being shown up for what it really is, a wagging tongue desperately trying to create expectations based on very serious sounding blather.