Remember how the $789 billion stimulus package and the banking bailout under the direction of Treasury Secretary Tim Geithner were supposed to restore confidence to the economy? Think again.
As the Dow Jones Industrial Average (DJIA) dipped to less than 8,000 points in the wake of Geithner's TARP II announcement on Feb. 10, CNBC contributor and UC-Irvine Professor of Economics and Public Policy Peter Navarro warned that it's the sign of a new floor for stock market index. He predicted the Dow to go to 6,000 on CNBC's Feb. 13 "Squawk on the Street."
"We got the market top in November 2007 at about 14,000 on the Dow," Navarro explained to co-host Mark Haines. "And we went down to 8,000 over the course of the year. We've been in this sideways pattern since until recently at 8,000. We put the fiscal stimulus in place. We put the bank bailout in place. The market says we don't like it. We break that critical support level."
In a follow-up interview with the Business & Media Institute, Navarro explained why the stimulus would not work - it would either fail due to lack of short-term stimulus or over-stimulate the economy in the long run, which would bind too much of the economy up in the government sector.
"There are two problems with the fiscal stimulus that could derail the economy," Navarro explained. "One is that it simply doesn't work. And the issue there, I think, one of the legitimate criticisms in the stimulus is that it really is not all that focused on short-term stimulus - that much of what it will do will take time that we don't really have right now."
Should it stimulate the economy for too long, it would drive up interest rates and therefore freeze up credit even more, prolonging a recession.
"The second part of it is that it's kind of a bookend's concern is that it may work too well and for too long, in which case the likely result will be a combination of inflation and higher interest rates, that then again choke the recovery off," Navarro said. "And that has to do with just the simple matter of how it's financed."
According to Navarro, to finance a budget deficit of this magnitude, you would have to sell bonds to the private market, which drives interest rates. Or print money, which would happen because the Federal Reserve, instead of the public, would buy Treasury bonds and that would force the Fed to create bank reserves to pay for it, which essentially increases the money supply and causes inflation.
Back during the 2008 presidential election campaign, pundits and pollsters were quick to point out that a sour economy tended to favor Democrats. However, Navarro said that thus far the Obama administration has failed to deliver and that's causing jitters on Wall Street.
"Now why does that matter?" Navarro said on "Squawk on the Street." "I view the market as a leading indicator of where the economy's going. And what that sideways pattern has been telling us is that there is great uncertainty about whether or not the recovery is going to happen. The problem we have, Mark, is that the global economy right now is getting worse at a faster rate than our policy is getting better. We expected competence from the Obama administration, but so far both the fiscal stimulus and the bank bailout do not reflect that confidence."
Navarro maintains a blog and free weekly newsletter, "The Well-Timed Strategy," at http://www.peternavarro.com/dailyblog.html
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→ Thanks, Jeff
February 13, 2009 - 19:40 ET by Cool ArrowI saw that this morning and agree with his assessment.
Stimulus did just about what I expected today. DOW down 1%. With this continuing drop, opportunities are out there.
Thanks for the link to his Newsletter. I'm going to subscribe
Another round of deleveraging
February 13, 2009 - 19:41 ET by legacyrepublicanOMG, another round of deleveraging, except this is on Obama's watch. When it become his recession and crisis. Right after he signs the Porkulus Stimulus bill I hope.
I saw Geithner's
February 13, 2009 - 19:42 ET by Clear thinkerI saw Geithner's performance the other day. This is the guy that Obama picked to save us???? Holy crap, we are so screwed!
Angry American II
Making Fun of AGW http://giovanniworld.wordpress.com/
→ That's him allright
February 13, 2009 - 19:50 ET by Cool ArrowOnly man in America who can save us.
Wonder what a society that chooses dishonesty over moral character deserves?
But what if...
February 13, 2009 - 23:25 ET by Karma...society chooses highly educated and experienced dishonesty over moral character? That should deserve us better, right?
We're temporarily screwed CA. Teach your children well and know they love you.
No representation, without taxation!
→ Here's a joke, Jeff
February 13, 2009 - 20:11 ET by Cool ArrowRemember Mark Finkelstien's entry for Column of the Year?
Mark Steyn pointed out that GM had a market cap of $2.2 billion?
Well, it's down to $1.53 billion in less than a month.
May as well laugh. GM has already been promised $13 billion. This is welfare. Pure and simple.
→ Stimulus caveat
February 13, 2009 - 20:35 ET by Cool ArrowGlenn Beck today revealed the States have no choice as to whether to accept the Pork Money.
I'd love to see Rick Perry refuse it.
*buries head in hands*
February 13, 2009 - 21:17 ET by katainkent*sigh*
All that is necessary for the triumph of evil is that good men do nothing. -Edmund Burke
We expected competence from
February 13, 2009 - 21:40 ET by TN MomWe expected competence from the Obama administration, but so far both the fiscal stimulus and the bank bailout do not reflect that confidence
The President is too busy with On.The.Job.Training. As is his Treasury Sec, Geithner. I am really scared.
NEW!!!!! TurboTax Deluxe - Timothy Geithner version
February 13, 2009 - 21:49 ET by right minded and lovin itWow - saw this on E-bay and bought it. It was so easy to navigate and after reporting an AGI of $75,000 I was due a tax refund of $250,000 what a deal! I even checked the $1.00 "Biden Patriotic Tax Give Back Fund" box. They even offered a copy of TurboTax for Dummies with the forward written by Timothy Geithner, Tom Daschle and the rest of "those crazy Cabinet" nominees. You know - this coupled with my stimulus tax cut of $13 a pay period really makes me thank God we finally have change we can believe in!
I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them Thomas Jefferson
right minded
February 13, 2009 - 21:58 ET by TN MomI bought the Turbo Tax Bundle Version. Mine came with a JUMBO Box of Tea Bags to send to my congress critters on April 15th!
Cliff???
February 13, 2009 - 23:14 ET by txcoYou know the cliff Obama said the economy was about to drive off of....well, with this Stimulus bill we're hitting the accelerator and driving off into the Grand Canyon....splat!!!!
Maybe I dreamed it, but I
February 13, 2009 - 23:20 ET by JerMaybe I dreamed it, but I thought Republicans generally applauded the appointment of Geithner when it was first announced.
Also, I'm a little confused regarding the official NB position on negative reporting about the economy. Haven't "gloom and doom" forecasts been usually derided here, or was that only the policy when they reflected poorly on the previous administration?
Jer
I believe you are
February 14, 2009 - 06:00 ET by RR GOPI believe you are correct. However, the RINO designation exists for a reason.
Rush Limbaugh would carry out quite a coup if he were to announce next week that he is now a registered Democrat.
Michael Moore joined the NRA so he could undermine that organization, so why not play their game?
One of the 24% who thinks George W. Bush was a great President. One of the 89% who wants to bring back the stock and pillory.
Opportunities Exist?
February 14, 2009 - 08:10 ET by mtdavs"Stimulus did just about what I expected today. DOW down 1%. With this continuing drop, opportunities are out there."
Interesting statement. Considering so far this month, the UD$ has been basically flat against the EUR, GBP and other currencies, has made it some interesting times on the Forex. Some have stated, forget the "long term" trading and concentrate on intraday; basically, 15 or 30 minute charts; maybe even the 5 minute chart. Even on stocks, might be a good thing to consider. Only trouble is, with that kind of trading, my blood pressure medication is made completely ineffective!
HORRIFIC BILL
February 14, 2009 - 10:41 ET by sawing battaBeyond Belief. What happened to America? What happened to the Democrat party - they are nothing but socialists now.
This is the single most breathtakingly irresponsible piece of legislation in memory. It is political payoff money to unions to create the building blocks for a one party system. And aside from the major provisions, Members voted on it having NOT READ IT. It is not Temporary, Targeted or Timely (other than the tax components that Republicans put in....)
The economy may rebound - and already shows some positive signs (retail sales UP last month!)...tax cuts will help a lot. throwing a trillion dollars into the economic mix will help the process in the near term, but it will also hurt...and will hurt far more than it helps in the long term as the inflation from all of this kicks in and creates a giant new 'tax' on all Americans.
Write a note to your children today that they can open in a decade....and apologize for what just happened as they will be saddled with trillions of new debt, socialized medicine, and so much more....this is just the beginning...wait til Immegration, wait til the Acorn uses its $4 BILLION to register all those newly naturalized citizens that immegration seeking free healthcare and education...and, of course, they are going to need a nice place to live....enter KELO.
The Dems have been socialists for a long time . . .
February 14, 2009 - 21:23 ET by CKA in Red State USAIt's just that a few decades of misinformation and outright lies from them and their thugs and thugettes in the advocacy/adversary media finally duped enough Americans to install them in power.
And now they cannot contain their ignorance, stupidity, contempt for people and their bankrupt vision.
That plus the spinelessness of the Republicans and their inability to think and act on their feet -- and connect more broadly with the electorate.
And those plus the way public education in America has become whatever it has, which certainly appears to be anything generally useful.
What's happened to America?
Best I can see, with the Dawn of Hope and Change on Jan. 20, we're about to enter a tailspin from which I don't know if we will recover.
My Version of Turbo Tax...
February 14, 2009 - 12:49 ET by Lord Erond...came with a few new features. When you hit 'calculate refund' it asked me if I was in the Obama cabinet. When I said no, it doubled my tax liability. When I checked yes to the Obama cabinet question, it doubled my refund. It also gave me the number of an attorney.
market falling
February 14, 2009 - 13:49 ET by charlietexasRemember how we got out of the great depression? WWII? Well, get ready for WWIII. Sounds a lot like what is happening. Gov't takeover of banks and free market corp's. Hyper inflation on the way after we print money. Other countries hurting, power grabs by other countries. Nationalism and then imperialism. Who will it be? China? Russia? Iran? When will they move out and capture landgrabs and wipe out Israel? Will Afghanistan be our Viet Nam with Obama and Holbrooke turning it into a nuanced war? Will Russia intervene? Who will blink?
Sounds like a Nuclear solution to me.
Bob Beckel (or Ed Asner,
February 14, 2009 - 13:49 ET by RR GOPBob Beckel (or Ed Asner, can't be sure) last night on Hannity just brushed aside the importance of the Stock Market when Hannity mentioned it.
OK, on one level it is an indicator of the economy. But, fundamentally, that means that if the Stock Market isn't doing well, then American commerce isn't either.
Is that too much to grasp?
Where do these Lib-bore-als think all this money is coming from in the first place? The Federal Reserve in essence printing money...ever hear of "inflation", knuckleheads?
One of the 24% who thinks George W. Bush was a great President. One of the 89% who wants to bring back the stock and pillory.
How is CNBC a part of Immelt's network?
February 15, 2009 - 00:28 ET by NObama08CNBC speaks the truth, they have Larry Kudlow on there at 4pm PST every night speaking the truth about the porkulus, Hussein, etc. This can not be a part of the NBC/GE brand.
www.fireandreamitche...