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The DOW-JONES went up 17 points in one day, and closed out as the best July in 20 years, is the ending of our problems or the eye of the storm? Below is CBSnews covering the event.
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Whatever you do, don't give any credit for this to Obama. Remember, there is no possible way that he can have any positive impact on anything, ever. :nod:
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Of course the credit doesn't go to Obama. We are just now experiencing the results of our Bush era stimulus check!
(Though it's probably unnecessary, I'll mention that this post is tongue-in-cheek, just in case anyone missed it.)
edit to add: On a serious note, I really think that economic ebb and flow is significantly affected by people's outlook. There is definitely an element of self-fulfilling prophecy. If the news stays positive for a while longer, then people will be encouraged to put money into the system. Employers will hire, people will buy, and the cycle will renew.
Certainly this recession was not going to be stopped by blithely ignoring the facts and spending wildly. But how much worse was it made when the media sensationalized it over and over as the second Great Depression? The answer is probably unknowable.
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In the most basic sense, yes, the ups and downs of the markets are all based on outlook and public perception, because that is what lends value to any commodity or service. That said, it's important to remember that the mass impression of "good times" v. "bad times" is not really what drives the market in any useful categorical way. The reality is complicated and dirty and recursive- like when the housing bubble was driving spending and debt and lowering savings, at the same time the value of the dollar was dropping, partly because, in the end, smart people were aware that the value being assigned to US real estate by some people was not going to hold up in the end, and that mounting debts were going to cave in that ceiling eventually. What simplistic commentators will insist upon is the idea that the cause and effect relationships between these events is linear, when the world economy is much too baroque for anyone to know what the hell is going on in even a small portion of it at any given time.
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Yeah, and the President has nothing to do with that... mhmm. Simplify and reduce. Reduce and simplify.
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The economy has done quite well at many times when the price of oil is high, and quite badly at times when the price of oil is low. The price of oil is not a very good indicator of anything related to the overall economy. It has at best a marginal relationship to economic activity, due to its commodity status. The President certainly has a far greater relationship -- if nothing else, he controls the strategic petroleum reserve, and can thus effectively control the price of oil in the short term (where, given the size of the reserve, the short term is at least a couple years long). A change in the price of oil could slightly change the timeline of a recovery or decline, but not the dynamics of it, absent stupid actions such as rationing.
Of course, that's true of the President as well. Just because he has more of an impact than oil doesn't mean he has much of an impact. Day to day fluctuations of the market are changed a little bit by governmental announcements (though unpredictably enough in direction that inside information rarely helps much), but long term trends aren't, and there's plenty of study to bear that up.
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quote:Originally posted by katharina: The president, be it Bush or Obama, has little to nothing (mostly nothing) to do with the economy.
Eh, that's true in the short term, but in the long term there are clearly many factors that the sitting president influences that have a great impact on the economy. Public infrastructure, research, tax policy, trade agreements, etc all have a pretty unquestionable impact on the economy in the long run.
Now, sorting out exactly who and what is responsible for the conditions of any given moment is so complex that I'd agree it is generally tough to give credit or blame, but I think it's a big stretch to say that they have little to do with one another.
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ricree101: almost all the items that have a decent impact on the economy long run I'd lay as much or more at Congress's door than the President's.
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Right - the things you mentioned and the things that matter in the long run are not at the sole discretion at the President.
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Use of the Strategic Petroleum Reserve is, though, as is announcing things like new planned initiatives, the only things I mentioned.
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quote:Originally posted by katharina: The president, be it Bush or Obama, has little to nothing (mostly nothing) to do with the economy.
Actually, this is entirely untrue, and the largest macroeconomic factors influencing the timeframe of the recovery will be related to the two stimulus packages instituted by Bush II and Obama.
The errors of this mentality sealed the end of many pre-Keynesian executives.
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*cough* economists, including those in the administration, are remarkably uncertain as to that. Even those who think Keynesian stimulus works (and even those who think that and think the packages looked anything like Keynesian stimulus, which is a smaller number) are extraordinarily divided as to what effect, if any, these specific stimulus packages have had. Overall, the opinion seems to have converged to "not much", though some economists are there because they think the packages were far too small, and others because they think the packages irrelevant. Not that there aren't some economists who think the packages have had some, or even a large positive effect.
But to treat the matter as "entirely" settled is not accurate in the least.
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Asserting that presidents have 'mostly nothing' to do with the economy is something that I will continue to assert is incorrect.
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If we mean in the long run, then it pretty much is true. For instance, the stimulus packages you mention (much as the timing of the end of the recession) will have no long run effect whatsoever. Economic growth in this country has been virtually constant for over a hundred years; even the great depression and world war two form no more than slight jiggling (and the trend line's intercept wasn't affected, either).
I'll give you that as a general statement, it would be more accurate to say "the specific actions of Presidents have a small effect on the economy, especially in the long term".
The rest of your post is wrong, though. Even an economist who thought the stimulus packages had gigantic effects would say the largest factor influencing the timeframe of the recovery is the natural adjustment of the economy. Everything else is just tweaking.
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In a less well-informed fashion, I'll echo fugu's surprise that you'd speak so authoritatively on something that is so hotly contested all over the world by economists and historians, Samprimary. That is, to what extent recovery is influenced by stimulus packages and to what extent the end of past executives was related to the matter at hand.
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Well, aside from Stimulus packages, the fact that every democratic U.S. President in the last 70ish years left office with a lower unemployment level than any Republican administration other than Reagan (and Reagan only beats Carter), doesn't really seem to affect the way people vote all that much. You'd think they'd notice that trend, or attach some significance to it if it was noticed.
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quote:Originally posted by Orincoro: Well, aside from Stimulus packages, the fact that every democratic U.S. President in the last 70ish years left office with a lower unemployment level than any Republican administration other than Reagan (and Reagan only beats Carter), doesn't really seem to affect the way people vote all that much. You'd think they'd notice that trend, or attach some significance to it if it was noticed.
One could argue that this goes with the American ebb and flow, just like our financial highs and lows. We keep on switching back and forth between democratic pres. to republican pres. as if we dont remember why we voted them out last time, without knowing the historical accuracy of your post myself, I will say that if that is 100% than I need to change my independant status.
Does anyone know the last time we voted two differant presidents in a row from the same party? wartime not withstanding.
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Blayne Bradley
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Many many many MANY presidents were different consecuteively and from the same party.
quote:Well, aside from Stimulus packages, the fact that every democratic U.S. President in the last 70ish years left office with a lower unemployment level than any Republican administration other than Reagan (and Reagan only beats Carter), doesn't really seem to affect the way people vote all that much. You'd think they'd notice that trend, or attach some significance to it if it was noticed.
The trouble with assigning importance to such trends is a very important question: what's the time-delay on the trend, exactly? If such a thing, if it even exists, could ever possibly be exact of course. Is it within a year? A term? Two terms or three?
Posts: 17164 | Registered: Jun 2001
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quote:Originally posted by fugu13: If we mean in the long run, then it pretty much is true. For instance, the stimulus packages you mention (much as the timing of the end of the recession) will have no long run effect whatsoever.
I mean, except for the debt we have to pay back, which will arc forward for centuries.
And the fact that the first package (by Bush) prevented the credit lockup from spontaneously undoing decades of infrastructure growth in the United States through the complete shutdown of the commercial paper market.
No. These things had very potent effects on the markets. Markets that are "long-term" insofar as human lifetimes are considered.
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quote:And the fact that the first package (by Bush) prevented the credit lockup from spontaneously undoing decades of infrastructure growth in the United States through the complete shutdown of the commercial paper market.
You do like the things with substantial disagreement, don't you? Especially that it would have any long-run effect. The great depression had no long run effect on the total production of the economy insofar as human lifetimes are concerned. As for short run effect, there are plenty who would argue that extending FDIC protection to money markets was enough to keep the commercial paper market afloat. Not to mention that volume has dropped since that point even more than it was projected to drop then, yet somehow the end has not come. Also, it has come out that many corporations that weren't able to sell commercial paper on terms they liked were turning to previously established but unused lines of credit, instead.
The debt we'll have to pay back is a reasonable point. Many people in power are able to do great damage to the economy, if they put their minds to it.
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quote:The great depression had no long run effect on the total production of the economy insofar as human lifetimes are concerned.
You can't say that our total GDP output over the next 80 years is roughly equivalent to what it would have been had the effect of the 1929 crash not been allowed to spiral out.
quote:As for short run effect, there are plenty who would argue that extending FDIC protection to money markets was enough to keep the commercial paper market afloat.
I wager that for every statement to this effect you could find from an economist, I would be able to find at least three or four stern rebuttals of the concept in the form of another important economist laying out the dire peril of the commercial paper lockup. Fed runners and independent economists from both sides of the political coin here, including those employed by both the Bush administration as well as the Obama administration, continue to talk about how serious the situation was due to promissory notes locking up. Solid lenders like major airports were unable to secure day-to-day expense loans despite being in good standing.
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quote:You can't say that our total GDP output over the next 80 years is roughly equivalent to what it would have been had the effect of the 1929 crash not been allowed to spiral out.
Yeah, I can (after a period where it wasn't; I said within a human lifetime, not immediately).
Here's the data: http://www.measuringworth.org/usgdp/ (after you view the data sets, there are links to graphs at the tops of the columns; things are clearest on the log graph).
Both real GDP and real GDP per capita had returned to trend (not just the slope, but where the previous trend would have been) approximately twenty years after they started declining. That's quite a bit less than a human lifetime. Notice that the trend is quite consistent, and most recessions aren't even noticeable. The great depression is a considerable outlier. I should also note that they had returned to above trend quite a bit more quickly (less than 15 years), an effect that happened from the combination of an end to a depression and a world war that left us the dominant economic power (over half of world GDP was us).
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quote:Well, aside from Stimulus packages, the fact that every democratic U.S. President in the last 70ish years left office with a lower unemployment level than any Republican administration other than Reagan (and Reagan only beats Carter), doesn't really seem to affect the way people vote all that much. You'd think they'd notice that trend, or attach some significance to it if it was noticed.
The trouble with assigning importance to such trends is a very important question: what's the time-delay on the trend, exactly? If such a thing, if it even exists, could ever possibly be exact of course. Is it within a year? A term? Two terms or three?
Of course point taken, but you certainly couldn't correlate those positive trends to the Republican administrations, as in, the democrats have somehow always benefited from the republican administrations, and the republicans have somehow always gotten shafted by democratic predecessors.
I would venture that the trend should be noticeable within 3-5 years. That doesn't seem unreasonable to me, considering the economic ups and downs we experienced under Bush II alone.
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