Friday, December 25, 2009

Still wondering

The U.S. economy apparently has avoided the bottomless pit, and yet... This blogger had already wondered back in the June 7th, 2009 blog entry 'So what happened to...' re what had happened to the 'toxic assets' that had been blamed for the downturn... and how the economy was supposed to recover when nothing much was really being done about this "cause" of the problem...

Since then the economy grew in the third quarter of 2009 (initially pegged as at a 3.5% annual rate, which subsequently has been dialed back to a still positive 2.2%), signaling the end of the recession. Growth is expected to continue, although multiple warnings that employment will be slow to rebound continue to be made...

In August President Obama renominated Ben Bernanke as Chairman of the Federal Reserve, and he was confirmed by the full Senate in December. Also in December TIME magazine picked Bernanke as the 2009 Person of the Year because, in their words, "... the main reason Ben Shalom Bernanke is TIME's Person of the Year for 2009 is that he is the most important player guiding the world's most important economy. His creative leadership helped ensure that 2009 was a period of weak recovery rather than catastrophic depression, and he still wields unrivaled power over our money, our jobs, our savings and our national future. The decisions he has made, and those he has yet to make, will shape the path of our prosperity, the direction of our politics and our relationship to the world..."

OK, so how was the economy turned around? Well, the administration shoveled cash into the system, via ARRA spending and tax cuts, "cash for clunkers," a first-time home buyers tax credit, and a variety of other mechanisms. The Federal Reserve also shoveled cash into the system (via a number of mechanisms - some overt and clear, others very obscure...), and in quantities that dwarfed anything that the administration had done. The Fed "... has responded to the evolving financial crisis both by expanding traditional Fed programs and implementing nontraditional programs. The aim of these actions is to improve credit markets through targeted infusions of liquidity and to thereby restore confidence and financial stability..." Just from 2007 to 2008 "... total assets on the Fed's balance sheet are now more than $2 trillion, more than twice the highest year-end total in its history. The doubling in the balance sheet from year-end 2007 dwarfs any other year-to-year increase (the next highest was a 60 percent increase from 1933 to 1934). As of Dec. 10, 2008, total Fed assets were approximately 15.8 percent of GDP, the highest total since the late 1940s. Fed loans as a percentage of GDP stands at 4.8 percent, near record highs, and three times what it was in the 1980s. ..." Mark to market rules were also rolled back... Beyond massive injections of liquidity this blogger hasn't found and/or read any other coherent explanation of how the economy has recovered... and so he is still wondering...

Oh well, Merry Christmas!

Previous blog entries related to this topic:

Random chart... - Nov 7th, 2009
Massive cuts? Or not? - Nov 2nd, 2009
So what happened to... - Jun 7th, 2009
Random chart - May 17th, 2009
Random chart - April 18th, 2009
Held to account? - April 16th, 2009
Automotive restructuring - April 4th, 2009
Theory vs. practice - March 30th, 2009
Random chart - March 18th, 2009
Random chart - March 12th, 2009
Random chart - March 9th, 2009
Random thoughts - Feb 15th, 2009
Rhetorical questions - Feb 11th, 2009
Better charts - Feb 10th, 2009
Random charts - Feb 9th, 2009
Random chart - Feb 8th, 2009
The high and mighty... - Feb 6th, 2009
Stimulus update II - Feb 3rd, 2009
Stimulus update - Jan 28th, 2009
Some recovery info - Jan 28th, 2009
Random chart - Jan 13th, 2009
Irony alert! - Jan 7th, 2009
Misc TARP updates - Dec 20th, 2008
Bailout/handout - Dec 13th, 2008
Recession decision - Dec 11th, 2008
Oh wow - Nov 24th, 2008
The answer? - Nov 18th, 2008
G20 - Nov 17th, 2008
Misc. financial crisis - Nov 15th, 2008
Financial Crisis misc. - Nov 11th, 2008
Goofs - Nov 7th, 2008
The money PIT - Oct 31st, 2008
Repeat question - Oct 30th, 2008
Up or down
- Oct 29th, 2008
Lest we forget... - October 27th
One possible reason... - Oct 27th
Great quotes... - Oct 27th
Thank you California and Florida - Oct 26th
The elephant (and donkey) in the room - Oct 25th
Great quotes... - Oct 25th
Say what? - Oct 22nd
Crisis unfolding - Oct 21st
Once, squared, cubed - Oct 8th
Mortgage mess - Oct 7th
Crash victims... charities - Oct 6th
Executive compensation (Section 111)Oct 4th
MOABOct 4th
Quotes… (updated) Oct 4th
Fingers crossedOct 4th
Great quotesOct 2nd
Wall Street vs. Main Street – IIOct 2nd
Wall Street vs. Main Street Oct 1st
Yet another plan (Soros) Oct 1st
Ouch – IIOct 1st
OuchSept 30th
All about CDSs Sept 30th
Genius!Sept 30th
Crisis expandingSept 29th
Great quotesSept 27th
Redefining “too big to fail”Sept 27th
Crashing the partySept 27th
Rough LandingSept 25th
Confused and nowhere to go (updated)Sept 24th
Street-wiseSept 24th
One can dreamSept 23rd
Government bailoutsSept 23rd
What it took – Sept 23rd
Truth RIP (updated 9/22)Sept 22nd
Vox clamantis in desertoSept 22nd
Finely calibrated reactionsSept 16th
Fannie and FreddieSept 10th
Fannie Mae and Freddie MacJul 24th
Mortgage meltdown (update) - Apr 1st
Mortgage meltdownMar 31st
Housing Stories III Jul 29th
Housing stories – IIMar 6th
Housing storiesApr 5th

1 comment:

  1. Cash for clunkers did not improve new car sales, the environment or the economy. It just caused 690,000 running cars to be destroyed. Because of that, used car prices went way up and used car sales and car donations went way down.