(no subject)

[drscott]

I've been wondering how some of the seemingly excellent economists working in the new administration could be justifying to themselves the damaging policies we're seeing in bailouts and Treasury's undue influence, plus a budget plan that is not only rose-colored but vastly increases government debt even after the hypothesized strong recovery.

Well, here's some indications in a NYT story:

Mr. Goolsbee and Mr. Summers also clashed in March over whether to bail out Chrysler and ease its merger with Fiat, or to let the automaker fail.

Mr. Summers, along with Mr. Geithner and the political advisers, favored giving Chrysler a second chance. “My judgment, and Tim’s judgment, was that given all the equities involved, and given the potentially traumatic effects on confidence, that it was much better to try to save Chrysler if a reasonable merger agreement could be reached,” he said.

Mr. Goolsbee argued that rescuing the financial system was one thing, since credit is the economy’s lifeblood, but the government should not run an auto company. Saving Chrysler, he added, could further harm General Motors, which stood to gain market share.

The arguments became so heated that Mr. Summers stormed from one meeting, a witness said. While he later included Mr. Goolsbee’s objections in a memorandum for Mr. Obama, he excluded Mr. Goolsbee from the decisive meeting with the president.

There, Mrs. Romer expressed the objections from the Council of Economic Advisers, but made a point of naming the absent Mr. Goolsbee. That prompted Mr. Obama to ask, “Where is Austan?” He had the aide summoned to state his case, in what some aides took as a rebuke to Mr. Summers. The discussion continued that evening, and Mr. Obama decided on the course Mr. Summers supported.

Three cheers for Goolsbee, but I would imagine the fans of dirigisme will force him out soon.

Comments

[pklexton.livejournal.com]

I finally got around to playing with the S&P data I have and extracting the financials to see what the earnings trend looks like. Granted this is not official, just my own home-made analysis, but it looks to me like from Aug. 2008 to Feb. 2009, S&P earnings were down about 20%, after excluding my definition of "financial" stocks - basically banks, insurance companies, and the like, as well as companies that were either deleted from or added to the S&P during the intervening months (so there is a large amount of survivor bias). From Feb. 2009 to May 2009, earnings for the same group were down another 25%. So even excluding financials, things still suck, and the rate of suckage is increasing, not decreasing, so I don't know where the recent market rally is coming from, other than mass hysteria and mob mentality re-rearing it's head.