Admittedly, I don’t listen to much talk radio anymore. Even the talk show hosts that I generally agree with drive me up a wall. But I happened to catch part of Neal Boortz’s interview with Rep. Ron Paul (R-TX), who has seen his support rise in his second bid as a Republican, during my lunch hour yesterday. This is significant because Boortz, a self-proclaimed libertarian who supports a very hawkish foreign policy, has been critical of Paul whenever possible.
Maybe I’ve been too hard on Boortz because, to my surprise, he hosted a very well-rounded, fair interview with Paul, discussing everything from foreign policy to the Fed to the media and Barack Obama to the European financial crisis. Perhaps even one of the best that I’ve heard with any candidate. Check it out below:
The Federal Reserve delivered some bad economic news yesterday, as if we haven’t had enough of that this year, as the central bank revised forecasts downward:
The Federal Reserve has lowered its growth forecasts and raised its unemployment projections, suggesting the economy has a longer path to recovery.
The central bank’s latest forecast released Wednesday predicts that the economy will grow just 1.6 percent to 1.7 percent for all of 2011. For 2012, growth will range between 2.5 percent and 2.9 percent. Both forecasts are roughly a full percentage point lower than the Fed’s projections from June.
The unemployment rate has been stuck near 9 percent for more than two years. The Fed doesn’t see that changing this year. It predicts it will fall between 8.5 percent and 8.7 percent next year. In June, the Fed had predicted unemployment would drop next year to as low as 7.8 percent.
The new forecast takes into account the substantial slowdown in growth that occurred earlier this year.
We did get some good economic news this morning as new jobless claims dropped below 400,000. We’ll find out Friday if the economy added a significant amount of jobs (meaning over 125,000 or above population growth) last month
While President Barack Obama recently announced the expansion of HARP — a mortgage relief program established in 2009, one of the frequent points of critics is that the impact of the move is limited to a small number of homeowners. Bob Barr, a former Congressman from Georgia, explained this point over at The Daily Caller last week:
The program itself suffers from significant limitations. Most notably, it applies only to mortgages backed by Fannie Mae and Freddie Mac. According to Mark Calabria of the Cato Institute, the program “is available only to those who have already had a mortgage for over two years, are current on their mortgage, and have missed no more than one payment per year.” Calabria equates the program to “helping only those that do not need any help.”
James Pethokoukis, an economist at the American Enterprise Institute, explains that the idea behind HARP is full of holes, and that similar tricks in the past have not aided our sluggish economy. He notes, for example, that Obama promised that some 4 million homeowners would benefit with the creation of HARP in 2009. However, only about 20% took advantage of the program. Pethokoukis also concludes that the high-end estimate that 1 million homeowners will take advantage of HARP represents only a fraction of the 11 million property owners who are underwater in their mortgages.
But the point that this program does nothing really to lift the economy is further emphasized by the news that the housing market, which has yet to hit rock bottom, is heading for yet another dip:
As I was perusing the web this morning reading recaps of last night’s Republican debate, I noticed a reoccuring theme. Apparently, Ron Paul directed his question to Herman Cain (each candidate was allowed to ask a question of another) about his issues with an audit of the Federal Reserve. Ed Morrissey briefly recounts the exchange:
Paul scored big on Cain’s Greenspan comments, and also had some good points about overregulation and how both parties have contributed to it. No real crazy moments, but he did get a hard rebuke from Cain after misquoting him and ended up looking contrite.
For reference, here is the exchange between Ron Paul and Herman Cain from last night’s economic debate at Dartmouth College:
REP. PAUL: Since the Federal Reserve is the engine of inflation, creates the business cycle, produces our recessions and our depressions, the Federal Reserve obviously is a very important issue. And fortunately tonight, we have a former director of the Federal Reserve at Kansas City, so I have a question for Mr. Cain.
Mr. Cain, in the past, you’ve been rather critical of any of us who would want to audit the Fed.
Yesterday wasn’t a good day on Wall Street. The Dow Jones dropped nearly 400 points — at one point during the day it had dropped 500 points — on a growing feeling that the economy is falling into another recession, problems in Europe, a feeling of unease towards the Federal Reserve’s latest monetary trick:
Stocks came off their worst levels, but still finished sharply lower Thursday in heavy-volume trading as a gloomy outlook from the Federal Reserve in addition to ongoing economic jitters fueled concerns of a recession.
The Dow Jones Industrial Average plunged 391.01 points, or 3.51 percent, to finish at 10,733.83, led by United Tech, Caterpillar and Alcoa, but still finished above its August closing low of 10,719.94. The blue-chip index skid 528 points in its intraday low.
The blue-chip index is on track for its worst week in almost three years.
The S&P 500 plummeted 37.20 points, or 3.19 percent, to close at 1,129.56 after flirting with its key technical support level of 1,120. The Nasdaq declined 82.52 points, or 3.25 percent, to end at 2,455.67.
The Fed announced it would launch a new $400 billion program in a move to rebalance its $2.87 trillion portfolio—a version of the widely expected Operation Twist—by selling shorter-term notes and using those funds to purchase longer-dated Treasurys.
Not unlike what the Federal Reserve did last week, Moody’s Analytics has lowered the United States’ short-term economic prospects:
Moody’s Analytics, a sister company to credit-ratings company Moody’s Investors Service, now expects real gross domestic product to increase at an annualized rate of about 2% in the second half of this year and just over 3% next year, compared with its estimate a month ago for growth of 3.5% for the second half of this year and through 2012.
The firm attributes most of the expected decline to a loss of business, investor and consumer confidence, noting the economy’s improving fundamentals such as the strengthening of business’s balance sheets and consumers’ strides in cutting household debt.
The credit-rating company also said it thinks the odds of a renewed recession over the next 12 months — now at 1 in 3 — will increase if stock prices continue to fall. Moody’s maintains that the odds of a renewed recession rise with each 100-point drop in the Dow Jones Industrial Average. While Moody’s expects the economic recovery will continue, prospects for economic growth and job creation have “diminished substantially.”
Though the U.S. economic recovery looked healthy at the beginning of the year, a series of events have hurt business, consumer and investor confidence, Moody’s said. These include surging prices for food and gasoline, natural disasters in Japan, Europe’s debt crisis and, most recently, the U.S. debt woes.
Congress pushed for an audit of the Federal Reserve. They wanted to know what was going on behind closed doors. The Fed wasn’t crazy about that, but the lost on that one. The result? Well, how about over $16 trillion in bailouts that the American public didn’t know a damned thing about for starters?
That’s right folks, $16 trillion was “loaned” out at 0% interest to corporations and national banks throughout the world. It hasn’t been paid back. So what’s the big deal? Here’s an analysis of what we’re talking about:
To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States government spanning its 200+ year history is “only” $14.5 trillion. The budget that is being debated so heavily in Congress and the Senate is “only” $3.5 trillion. Take all of the outrage and debate over the $1.5 trillion deficit into consideration, and swallow this Red pill: There was no debate about whether $16,000,000,000,000 would be given to failing banks and failing corporations around the world.
Keep in mind that the Federal Reserve isn’t exactly a private bank. It’s a semi-private bank that’s in charge of massive amounts of the United States economy. In addition to acting as a bank, loaning money to other banks that permits them to loan it to us, it also lists the following as among it’s function.
The Federal Reserve has responsibility for supervising and regulating the following segments of the banking industry to ensure safe and sound banking practices and compliance with banking laws:
Wall Street continued its mood swings yesterday as the Dow Jones gained 423 points on Thursday, largely recovering from the previous day’s losses:
Stocks surged sharply across the board Thursday, with the S&P and Nasdaq wiping out the previous session’s losses, as investors snapped up beaten-down sectors. Despite the day’s rally, the Dow and S&P are still down more than 2 percent for the week.
The Dow Jones Industrial Average soared 423.37 points, or 3.95 percent, to end at 11,143.31, well above the psychologically-significant 11,000 level, led by Cisco and BofA. The Dow was up as many as 559 points during its intraday high.
The blue-chip has alternated between sharp gains and losses over the past eight days and has logged its fourth straight closing change of over 400 points for the first time.
The S&P 500 jumped 51.88 points, or 4.63 percent, to close at 1,172.64 and the Nasdaq rallied 111.63 points, or 4.69 percent, to finish at 2,492.68. Both indexes erased all of the previous session’s losses.
You’re no doubt wondering why the stock market has been such a rollercoaster this week. We’ve already pointed out some of the causes of that this week, such as the Federal Reserve not really having any other tools (outside of QE3, and that’s a dubious weapon) and uncertainty in European markets. But there are other factors at play, including fear, a lack of leadership in Washington and forced selling.
Yesterday was another bad day on Wall Street as the gains from the day before, which mostly made up losses on Monday, were completely erased and then some:
The Dow Jones Industrial Average tumbled 519.83 points, or 4.62 percent, to finish at 10,719.94, wiping out the previous session’s 429-point rally. The blue-chip index has had triple-digit moves in four of the last five trading days.
The Dow has now lost over 2,000 points, or nearly 16 percent, in the last 14 trading sessions (or since the close on Jul. 21). It’s the Dow’s worst 14-day decline since March 2009.
The S&P 500 lost 51.77 points, or 4.42 percent, to close at 1,120.76.
The Nasdaq dropped 101.47 points, or 4.09 percent, to end at 2,381.05.
Both the S&P and Nasdaq have shed almost 17 percent over the past 13 trading sessions (or since the close on Jul. 13), which is the worst 13-day drop since Mar. 2009 and Nov. 2008, respectively.
At least some of the problem is continued debt problems in Europe, including the possibility of France’s credit rating being downgraded. The Federal Reserve’s less than glowing view of the economy for the next two years haven’t helped, and the Wall Street Journal is calling the Fed on it, noting the plan to keep interest rates artificially low is “what a central bank does when it wants to appear to do something to help the economy but has already fired most of its ammunition.”