The nation's retailers were watching anxiously, having already suffered significant declines this year thanks to the weakening U.S. economy.
But the first nationwide returns were positive for merchants.
ShopperTrak RCT, a retail industry research firm, said total Black Friday sales rose 3% this year, to about $10.6 billion nationwide.
The federal government committed an additional $800 billion to two new loan programs on Tuesday, bringing its cumulative commitment to financial rescue initiatives to a staggering $8.5 trillion, according to Bloomberg News.That sum represents almost 60 percent of the nation's estimated gross domestic product.
Given the unprecedented size and complexity of these programs and the fact that many have never been tried before, it's impossible to predict how much they will cost taxpayers. The final cost won't be known for many years...
That sum represents almost 60 percent of the nation's estimated gross domestic product.
Given the unprecedented size and complexity of these programs and the fact that many have never been tried before, it's impossible to predict how much they will cost taxpayers. The final cost won't be known for many years.
My thoughts: The costs are dwarfing the initial $700 billion bailout (passed in October) that the American people overwhelmingly opposed. It is probably asking too much for ALL of the people in Washington to be held accountable in the 2010 election.
The U.S. government is now willing to spend more than $7 trillion to help rescue the economy. That's about $23,000 for every American, and more than half of U.S. annual gross domestic product.It's a staggering and unprecedented amount of money. The last time the government went on a spending spree to cure a crisis was in the late 1980s and 1990s during the savings and loan crisis. But the $160 billion ($237 billion in today's dollars) it spent then comes nowhere close to what's being spent now.
But it may not be as bad as it seems: A substantial portion of that $7 trillion is investment, the government hasn't spent close to the total allotment yet, and the taxpayer may come out on top in the end.
"It's a lot of money, but it's not like it's out the door, never to be seen again," said Dean Baker, co-director of the Center for Economic and Policy Research. "A lot will be lost, but we're not going to lose anywhere close to $7 trillion."
read the CNN story
Inflation Adjusted Cost: $782 million
Inflation Adjusted Cost: $7.9 billion
3. Gulf War I Original Cost: $61 billion
Inflation Adjusted Cost: $98 billion
4. Marshall Plan Original Cost: $12.7 billion
Inflation Adjusted Cost: $115.3 billion
Inflation Adjusted Cost: $217 billion
6. Race to the Moon Original Cost: $36.4 billion
Inflation Adjusted Cost: $237 billion
7. Savings & Loan Crisis Original Cost: $153 billion
Inflation Adjusted Cost: $256 billion
8. Korean War Original Cost: $54 billion
Inflation Adjusted Cost: $454 billion
9. The New Deal Original Cost: $32 billion (Est)
Inflation Adjusted Cost: $500 billion (Est)
10. Gulf War II / War on Terror Original Cost: $551 billion
Inflation Adjusted Cost: $597 billion
11. Vietnam War Original Cost: $111 billion
Inflation Adjusted Cost: $698 billion
12. NASA (Cumulative) Original Cost: $416.7 billion
Inflation Adjusted Cost: $851.2 billion
13. World War II Original Cost: $288 billion
Inflation Adjusted Cost: $3.6 trillion
Greenspan refused to let people fail. And so we've had no failure in the financial community and now we've spent trillions of dollars bailing out Wall Street for their mistakes and that's damaging the whole economy - 300 million Americans to bail out a million people and their failures. This is not good for America. We're damaging the system. We're weakening the system dramatically.
Why are we bailing out Citibank? Why are 300 million Americans having to pay for Citibank's mistakes? The way the system is supposed to work... people fail, and then the competent people take over the assets from the failed people and you start again from a new, stronger base. What we're doing this time is they're taking the assets from the competent people, giving them to the incompetent people, and saying, "Ok, now you can compete with the competent people." So everybody's weakened. The whole nation is weakened. The whole economy's weakened. That's not the way it's supposed to work.
There are many banks, many brokers, many homeowners, many citizens who've been sitting there, doing what they were supposed to do, minding their manners, not getting extended, waiting for this to happen, knowing that someday all of this foolishness is going to wind up as a disaster. Now, instead of being rewarded, they're being punished. All these homeowners who did nothing wrong are now having to pay for the people who did crazy things like buying four homes with no job. This is weakening America dramatically.
~ Jim Rogers, Bloomberg TV, November 24, 2008
The Dow Jones industrial average (INDU) gained 397 points, or 4.9%, after having been up 552 points earlier in the afternoon. The Standard & Poor's 500 (SPX) index rose 6.4% and the Nasdaq composite (COMP) gained 6.3%.
The market also rallied Friday. The two-session gain of 891.10 points was the biggest two-session gain ever, according to Dow Jones. The percentage gain of 11.8% was the biggest two-session percentage gain since Oct. 1987.
The S&P 500 also saw its biggest two-session percentage gain since Oct. 1987, rising 13.2%. Its point gain was not significant statistically.
The traditional story is that President Franklin D. Roosevelt rescued capitalism by resorting to extensive government intervention; the truth is that Roosevelt changed course from year to year, trying a mix of policies, some good and some bad. It’s worth sorting through this grab bag now, to evaluate whether any of these policies might be helpful...
MONETARY POLICY IS KEY As Milton Friedman and Anna Jacobson Schwartz argued in a classic book, “A Monetary History of the United States,” the single biggest cause of the Great Depression was that the Federal Reserve let the money supply fall by one-third, causing deflation. Furthermore, banks were allowed to fail, causing a credit crisis...
It’s not just monetary and fiscal policies that are important. Roosevelt instituted a disastrous legacy of agricultural subsidies and sought to cartelize industry, backed by force of law. Neither policy helped the economy recover.
He also took steps to strengthen unions and to keep real wages high. This helped workers who had jobs, but made it much harder for the unemployed to get back to work. One result was unemployment rates that remained high throughout the New Deal period...
DON’T RAISE TAXES IN A SLUMP The New Deal’s legacy of public worksprograms has given many people the impression that it was a time of expansionary fiscal policy, but that isn’t quite right. Government spending went up considerably, but taxes rose, too. Under President Herbert Hoover and continuing with Roosevelt, the federal government increased income taxes, excise taxes, inheritance taxes, corporate income taxes, holding company taxes and “excess profits” taxes.
In short, expansionary monetary policy and wartime orders from Europe, not the well-known policies of the New Deal, did the most to make the American economy climb out of the Depression. Our current downturn will end as well someday, and, as in the ’30s, the recovery will probably come for reasons that have little to do with most policy initiatives.
read the New York Times article
In March, National Journal had this précis on the couple: “As professors at the University of California (Berkeley), they are well-known macroeconomists — experts on the workings of the U.S. economy — who jointly hold one of six spots on the academic committee of economists that decides when recessions begin and end. They are both steeped in the history of the country's economy and have recently produced a series of papers looking at the causes and effects of most of the major changes in tax policy in the last 100 years.
“At the same time that Obama is calling for higher income taxes on people making $250,000 or more, the Romers have found that tax increases are generally bad for economic growth and that they primarily discourage investment — the supply-side argument that conservatives use to justify tax cuts for the rich. On the other hand, the Romers have shredded the conservative premise that tax cuts eventually force spending reductions (‘starving the beast’). Instead, they concluded that tax reductions lead only to one thing — offsetting tax increases to recover lost revenue.”
source
"We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies."
"Ironically, our work shows that the recovery would have been very rapid had the government not intervened."
from Cole and Ohanian
"The ever-present demand to "do something" is unfortunately immune to the wisdom counseling that there are some problems best left to sort themselves out. Government efforts to "solve" market adjustments and dislocations typically -- and at best -- supply only short-run relief while making the longer-run situation more dire....
The New Deal and the genuine risk of outright socialization of industry in the 1930s kept the American economy in deep doldrums for a much longer time than would have been the case if Uncle Sam just said "laissez faire" and had conspicuously ignored all the Very Smart People who clamored for socialism.
Donald Bourdreaux
Ron Paul Addressing the House of Representatives 11/20/08Madame Speaker, many Americans are hoping the new administration will solve the economic problems we face. That’s not likely to happen, because the economic advisors to the new President have no more understanding of how to get us out of this mess than previous administrations and Congresses understood how the crisis was brought about in the first place.
Except for a rare few, Members of Congress are unaware of Austrian Free Market economics. For the last 80 years, the legislative, judiciary and executive branches of our government have been totally influenced by Keynesian economics. If they had had any understanding of the Austrian economic explanation of the business cycle, they would have never permitted the dangerous bubbles that always lead to painful corrections.
Today, a major economic crisis is unfolding. New government programs are started daily, and future plans are being made for even more. All are based on the belief that we’re in this mess because free-market capitalism and sound money failed. The obsession is with more spending, bailouts of bad investments, more debt, and further dollar debasement. Many are saying we need an international answer to our problems with the establishment of a world central bank and a single fiat reserve currency. These suggestions are merely more of the same policies that created our mess and are doomed to fail.
At least 90% of the cause for the financial crisis can be laid at the doorstep of the Federal Reserve. It is the manipulation of credit, the money supply, and interest rates that caused the various bubbles to form. Congress added fuel to the fire by various programs and institutions like the Community Reinvestment Act, Fannie Mae and Freddie Mac, FDIC, and HUD mandates, which were all backed up by aggressive court rulings...
The Federal Reserve created our problem, yet it manages to gain even more power in the socialization of the entire financial system. The whole bailout process this past year was characterized by no oversight, no limits, no concerns, no understanding, and no common sense...
All the programs since the Depression were meant to prevent recessions and depressions. Yet all that was done was to plant the seeds of the greatest financial bubble in all history. Because of this lack of understanding, the stage is now set for massive nationalization of the financial system and quite likely the means of production.
Although it is obvious that the Keynesians were all wrong and interventionism and central economic planning don’t work, whom are we listening to for advice on getting us out of this mess? Unfortunately, it’s the Keynesians, the socialists, and big-government proponents.
Who’s being ignored? The Austrian free-market economists – the very ones who predicted not only the Great Depression, but the calamity we’re dealing with today. If the crisis was predictable and is explainable, why did no one listen? It’s because too many politicians believed that a free lunch was possible and a new economic paradigm had arrived. But we’ve heard that one before – like the philosopher’s stone that could turn lead into gold. Prosperity without work is a dream of the ages...
The policies of big-government proponents are running out of steam. Their policies have failed and will continue to fail. Merely doing more of what caused the crisis can hardly provide a solution...
There are limits. A country cannot forever depend on a central bank to keep the economy afloat and the currency functionable through constant acceleration of money supply growth. Eventually the laws of economics will overrule the politicians, the bureaucrats and the central bankers. The system will fail to respond unless the excess debt and mal-investment is liquidated. If it goes too far and the wild extravagance is not arrested, runaway inflation will result, and an entirely new currency will be required to restore growth and reasonable political stability.
The choice we face is ominous: We either accept world-wide authoritarian government holding together a flawed system, OR we restore the principles of the Constitution, limit government power, restore commodity money without a Federal Reserve system, reject world government, and promote the cause of peace by protecting liberty equally for all persons. Freedom is the answer.
The Dow Jones industrial average (INDU) rose 494 points, the fifth-biggest single-session point gain ever, according to Dow Jones. The daily gain of 6.5% was not a record.
The Standard & Poor's 500 (SPX) index gained 6.3% and the Nasdaq composite (COMP) added 5.2%.
Wall Street slumped Thursday, with the S&P 500 plunging to an 11-1/2 year low as fears of a prolonged recession sparked a massive selloff.Treasury prices rallied as investors sought the comparative safety of government debt. The dollar was mixed versus other major currencies. Oil prices plunged
The Standard & Poor's 500 (SPX) index lost 6.7% and closed at its lowest point sine April 14, 1997.
The Dow Jones industrial average tumbled (INDU) 5.6% and the Nasdaq composite (COMP) slumped 5.1%. Both the Dow and Nasdaq closed at their lowest points since March 12, 2003, which was just above the low of the last bear market.
The Dow has lost 872 points, or 10.4%, over the last two sessions. It saw a bigger two-day point drop in the two sessions after the presidential election, but it hadn't seen either two-day percentage drops since October 1987, according to Dow Jones...
Since peaking at an all-time closing high of 1,565.15 on Oct. 9, 2007, the S&P 500 has lost 52%. The Dow has lost nearly 47% since closing at an all-time high of 14,164.53 on the same day. Since hitting a bull market high of 2,859.12 on Oct. 31, 2007, the Nasdaq has lost 54%.
My thoughts: We are still looking for the bottom. Good thing Paulson and the bailout saved us.
A poll released Thursday found that a majority of Americans believe that President-elect Barack Obama can fix the economy.According to a CNN/Opinion Research Corp. poll, 76% of Americans said they believe it's likely that Obama will improve economic conditions.
In addition, 73% of those surveyed said they believe that Obama will bring stability to the financial markets...
Of those surveyed, 67% said they believe that Obama will stick to one of his most talked about promises: providing tax cuts to the middle class.
Obama's plans include providing a $1,000 tax cut for working couples making less than $250,000 and introducing other tax breaks for lower and middle-income households.
Another one of Obama's campaign pledges included leaving all tax cuts in place for everyone except couples making more than $250,000 and single filers making more than $200,000. Those high-income groups would see their top two income tax rates revert to 36% and 39.6% from 33% and 35%, respectively.
My thoughts: Good luck. The Dow has lost over 2000 points since election day. This is not a sign of hope and optimism. Raising rates during a economic downturn could be catastrophic.
Walter Williams on Socialism
It employs evil means, coercion or taking the property of one person, to accomplish good ends, helping one's fellow man. Helping one's fellow man in need, by reaching into one's own pockets, is a laudable and praiseworthy goal. Doing the same through coercion and reaching into another's pockets has no redeeming features and is worthy of condemnation...
I don't believe any moral case can be made for the forcible use of one person to serve the purposes of another. But that conclusion is not nearly as important as the fact that so many of my fellow Americans give wide support to using people. I would like to think it is because they haven't considered that more than $2 trillion of the over $3 trillion federal budget represents Americans using one another. Of course, they might consider it compensatory justice. For example, one American might think, "Farmers get Congress to use me to serve the needs of some farmers. I'm going to get Congress to use someone else to serve my needs by subsidizing my child's college education."
The bottom line is that we've become a nation of thieves, a value rejected by our founders. James Madison, the father of our Constitution, was horrified when Congress appropriated $15,000 to help French refugees. He said, "I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents." Tragically, today's Americans would run Madison out of town on a rail.
read the essay
Stocks fell hard on Wednesday, with the Dow closing below 8,000 for the first time since March 2003, as ongoing anxiety about the economy and uncertainty about the future of the auto industry weighed on the market. The Dow Jones industrial average (INDU) shed more than 400 points to close 5% lower. All 30 Dow components lost ground.
The Standard & Poor's 500 (SPX) index slid 6% to its lowest level since March 2003. And the Nasdaq composite (COMP) lost 6.5% to settle at its lowest point since April 2003.
"I am very proud of the decisive actions by Treasury, the Fed and the FDIC to stabilize our financial system," Paulson told members of Congress in his prepared remarks. "We have done what was necessary as facts and conditions in the market and economy have changed."
read the CNN article
My thoughts: A great defense of free markets in a speech basically advocating more government interference in the market. At this point no rational person believes Bush supports free markets in the abstract or practical sense.History has shown that the greater threat to economic prosperity is not too little government involvement in the market, it is too much government involvement in the market. We saw this in the case of Fannie Mae and Freddie Mac.
Because these firms were chartered by the U.S. Congress, many believed they were backed by the full faith and credit of the U. S. government. Investors put huge amounts of money into Fannie and Freddie, which they used to build up irresponsibly large portfolios of mortgage-backed securities. When the housing market declined, these securities, of course, plummeted in value. It took a taxpayer-funded rescue to keep Fannie and Freddie from collapsing in a way that would have devastated the global financial system. There is a clear lesson: Our aim should not be more government -- it should be smarter government.
All this leads to the most important principle that should guide our work: While reforms in the financial sector are essential, the long-term solution to today's problems is sustained economic growth. And the surest path to that growth is free markets and free people.
In the wake of the financial crisis, voices from the left and right equate the free-enterprise system with greed and exploitation and failure. It's true this crisis included failures -- by lenders and borrowers and financial firms, and by governments and independent regulators. But the crisis was not a failure of the free-market system. And the answer is not to try to reinvent that system. It is to fix the problems, make reforms, and move forward with the free-market principles that have delivered prosperity and hope to people all across the globe.
Capitalism is not perfect. But it is by far the most efficient and just way of structuring an economy. Capitalism offers people the freedom to choose where they work and what they do, the opportunity to buy or sell products they want, and the dignity that comes with profiting from their talent and hard work. The free market provides the incentives to work, to innovate, to save, to invest wisely, and to create jobs for others. And as millions of people pursue these incentives together, whole societies benefit.
Think back. Think far, far back into the past. Think all the way back to the last week of September 2008. Historians tell us that at that time many Americans took leave of their senses. Despite all the evidence of their own eyes, ears, and noses, they became persuaded that the world as they had always known it stood on the verge of utter destruction. Hysterical "journalists" and "experts" on radio and television told them so. What else could they do? Because life without a flush 401(k) lay beyond their wildest imagination, they concluded that "something must be done."
That realization became the signal for hundreds of devoted public servants to leap into action to save civilization. Understanding full well that the people expected them to "do something," they looked around for something to do, and the first thing they noticed was a bill that the Treasury Department had put forward. They didn't like it at first, but after rather frantically redesigning it as a gigantic Christmas tree with all sorts of ornaments and lights they fancied would aid their reelection, they enacted the Emergency Economic Stabilization Act of 2008, known in some quarters as the Bailout of Abominations.
The core of this statute consists of the Troubled Asset Relief Program (TARP), in which the Secretary of the Treasury would expend as much as $700 billion in two installments to purchase rotten paper, such as mortgage-backed derivatives, from banks and other financial institutions. It was a bold stroke, to be sure. An unnecessary and foolish stroke, too, yet, withal, bold in the fashion of fearing nothing but fear itself, which was precisely the kind of boldness the crisis seemed to demand...
Some might to tempted to call the TARP an utter failure, given that it failed completely to carry out its stated objective, but brighter boys will see that this interpretation is all wrong. Look, Hank’s pals have the $290 billion that the Treasury has agreed to hand over to them; and before long, no doubt, Congress will authorize the Treasury to tap into the second bag of $350 billion for the purpose of promoting good will toward men, especially men (and women) whose votes for Democrats need to be rewarded in the Brave New Obama era. The United Automobile Workers union appears to be a leading candidate for such a reward (indirectly, in its case)―besides, if GM, Ford, and Chrysler went belly-up, life on earth would screech to an untimely end, long before global warming had killed off the whales and the cockroaches. But many others besides the Detroit Bad Boys and their not-always-hardworking employees will be straining at the bit for a sweet chunk of the loot.
Notwithstanding the many developments on the bailout front during the past six weeks, the New York Times, like other media outlets, continues to quote Wall Street insiders who report, as Alex Roever of JPMorgan Chase did recently: "You have a market that is frozen." What planet do these guys live on? It certainly is not the same one to which the Federal Reserve's data apply. I’ve been singing this song for many weeks, but I’m going to keep singing it until somebody in the news media wakes up and realizes that these "frozen credit market" tales are pure hooey. Look at the data, for crissake. By now we should all be ready to move beyond hysteria, get a grip on reality, and begin thinking about how to repeal everything the government has done during the past six weeks.
My thoughts: An excellent analysis from one of the greatest economic historians writing today. The American people were completely lied to on a subject they really can't comprehend. The data did not back up the official story, so the the media bombarded us will anecdotal evidence. The American people still opposed the bill. It was passed anyway. The Dow has dropped about 20% since the passage and Washington seems shocked that its plan failed. Actually they will never admit failure, but continue with new "solutions".
The Treasury Department on Wednesday officially abandoned the original strategy behind its $700 billion effort to rescue the financial system, as administration officials acknowledged that banks and financial institutions were as unwilling as ever to lend to consumers...
The program, still in the planning stages, would for the first time use bailout funds specifically to help consumers instead of banks, savings and loans and Wall Street firms...
Mr. Paulson conceded that he had scrapped the plan he originally sold to Congress in September, which was to have the Treasury Department buy hundreds of billions of dollars worth of illiquid mortgage-backed securities in order to free up banks to resume normal lending.
The program is still called the Troubled Asset Relief Program, or TARP, but it will not buy troubled assets. “Our assessment at this time is that this is not the most effective way to use TARP funds,” Mr. Paulson said.
Instead, Treasury will step up its program of injecting capital directly into banks and, for the first time, expand it to include financial companies that are not federally regulated banks or thrifts.
read the New York Times article
The Dow Jones Industrial Average closed at 10,482.85 on October, 2—the day before the announcement that the $700 bailout had been reached. Today the Dow closed 8,282.66 for a total percentage loss of 20.99% since the bailout was announced.from Bryan Caplan
I'm going to dissect one of Hoover's last major speeches before the 1932 election - his November 5, 1932 address in St. Paul. In this speech, Hoover gives two long lists: The first about "our long-view policies to cement that recovery and to stimulate progress in our country for the future", the second about "the measures, lack of measures, or destructive measures proposed by our opponents."In this post, I'm going to review all 21 items on Hoover's list of what he did right; in the next, I'll turn to all 19 items on his list of what his opponents did wrong. Ready? OK, here are the 21 policies Hoover wanted the whole country to know about
read the list here
No: David R. Henderson and Jeffrey Hummel
Is Alan Greenspan to blame for the current housing bubble and the ongoing financial crisis? A growing chorus charges the former Federal Reserve chairman with being an "inflationist" whose loose monetary policy caused or significantly contributed to our current economic troubles. However, although Greenspan's policies weren't perfect, his monetary policy was in fact tight, and his legacy is one of having overseen low and stable inflation and a striking dampening of the business cycle.
Critics charge Greenspan with having carried on an excessively expansionary monetary policy, particularly following the recession of 2001. They note how low interest rates were from 2002 through 2004 and argue that those low rates paved the way for everything from high prices at the pump to high prices at the supermarket, from the housing crisis to the financial crisis. In so doing, those critics make the classic mistake of using interest rates to evaluate monetary policy, reasoning that if interest rates are low, recent monetary policy must have been expansionary. It is not the Federal Reserve but supply and demand that ultimately determines interest rates. Although central banks can push rates up or down to some degree, the globally integrated financial system reduces the Fed's ability to significantly influence rates.
read the paper
Yes: George A. Selgin
David Henderson and Jeff Hummel have managed to ruffle quite a few Austrian feathers with their recent Cato briefing paper, and no wonder: that paper claims not only that Alan Greenspan's Fed was innocent of any role in encouraging the housing boom but that Greenspan had actually managed to do something Austrian monetary economists have long claimed to be impossible, namely, solve the monetary-central-planning problem. Greenspan, by their assessment, managed to mimic the kind of money-demand accommodating money supply growth that would occur under free banking, thereby achieving (according to their paper's executive summary) "a striking dampening of the business cycle."
read the paper
With a collapsing housing market, a falling stock market, and a serious economic recession on the immediate horizon, the blame game about who or what has been behind the financial nightmare is in full swing.
In recent testimony before a congressional committee former Federal Reserve Board Chairman, Alan Greenspan, pointed his finger at various financial insurance schemes and the inescapable uncertainty of the future. “We’re not smart enough as people,” he said. “We just cannot see events that far in advance.”
The one thing he did not admit was that it was his own monetary policy when he was at the helm of America’s central bank that created the boom that has now resulted in a crash.
The ballooning housing market and the rising stock market of the past decade would have been impossible if not for the easy money policy of the Federal Reserve. Monetary expansion through the banking system and resulting low rates of interest fed the housing and stock market frenzy, indeed it made them possible....
Greenspan was certainly right that an uncertain future makes it difficult to predict when speculative bubbles will burst. But it was not unpredictable to know that years of easy monetary policy and accompanying near zero or negative real interest rates were creating an unsustainable boom that was setting the stage for an inevitable great crash.
read the entire essay
The Dow Jones industrial average (INDU) lost around 443 points, or 4.9%. The two-session decline of 929 points, or 9.7%, marked the biggest two-session point loss ever and the biggest two-session percentage decline in 21 years, according to Dow Jones.
from Carpe Diem
