- “You’ve all won tax liability!” The Taxpayers Clearinghouse is so absurd that it could only happen in reality. Throwing the money at Tim Geithner—“You’re going to take it from us anyways”—was inspired.
- Brazil is challenging the “Buy American” provisions in the “stimulus” bill. In other words, a stupid provision has the potential to go Smoot-Hawley on us. Good job totally re-creating the 1930s, guys.
- Arnold Kling argues that we—well, that Congress and the executive—have mis-placed priorities when it comes to “stimulus.”
- TARP (i.e., Corporate Welfare For Banks, Part 1) isn’t even sending money to banks—it’s going to holding companies. And these holding companies aren’t putting the money back into banks to loan, in part because of uncertainty (not at all helped by the “new day, new policy” antics at the Fed and Treasury) and in part because the bundling insurance companies aren’t going to buy new mortgage and loan packages until they know what kind of shape they’re in. Let them fail—it’s the only way to get good information on who’s solid and who’s not.
- Democrats remain fiscal hawks about defense spending. It’s just a shame that defense spending (even including operations in Iraq and Afghanistan) is about 15% of the federal budget and entitlement spending already takes up twice as much and is going to expand. I’ve got a compromise for Barney Frank, who is apparently so interested in “fiscal sanity:” instead of cutting defense, let’s kill the omnibus spending bill being debated in Congress. That bill, at $410 billion, would be much more than the cuts that anybody could make at Defense without disbanding the military. If that’s not enough, there’s about $1 trillion that just passed that we could get cut, not to mention dismantling the plans for TARP 2: Electric Boogaloo. And that’s before getting drastic and actually cutting existing programs.
- Via Samizdata, here is TARP in pictures. To make it realistic, they need a few more rounds…
- Here is a potential way of pricing illiquid assets.
- Bobby Jindal has rejected about $100 million in bailout funds because it would require additional state governmental expenditures after the temporary funds run out. Tennessee’s Governor, Phil Breseden (a Democrat), is looking at doing the same.
- Ireland’s governmental debt has blown up and they may default. One thing Heritage points out that a lot of people have missed is that the US isn’t the only country running major budget deficits, and with all of these governments looking for additional funds, interest rates are going to go up, especially if national credit ratings become tarnished. The fact that the US is adding trillions of debt (and not even counting long-term debt in Social Security and Medicare) means that the Global Debt Bubble is coming.
- Over at Political Calculations, there is a discussion of chaos in markets and what this actually means. It’s not nearly as, well, chaotic as you would first think.
- Pity those with $800,000 houses that are only worth $675,000 now. But here’s the problem that I see: it doesn’t matter what your mortgage value is as long as your employment circumstances haven’t changed. She presumably had that $800,000 mortgage two years ago, and as long as they get the same income, the fact that the house value dropped doesn’t change income. It’s the same thing when you lease a car: you lease at full value, but as soon as you drive the car off the lot, the value drops. This doesn’t mean that you’ve really increased your probability of not paying off that lease, though, as your ability to pay is independent of the value of that asset (except in the case that you need to re-sell the asset to pay off the lease, and in this case, you shouldn’t have gotten the lease to begin with).
- Poor AIG, they need yet another bailout. Let them fail already. If they need regular injections of hundreds of billions of dollars, their shareholders and management deserve to lose their money. You can bet that if they survive, AIG isn’t going to be sending me thousands of dollars if I run into financial troubles, so why am I doing that for them?
- Miners mine, carpenters hammer, and Europeans regulate. Because if Basel I was part of the problem and if Basel II is so convoluted that it isn’t even in place yet (after 4 1/2 years), let’s just have politicians throw together some quick regulations—how could that possibly go wrong?
February 25, 2009
Various Economic Notes
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