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Happy Days Are Here Again!

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Long-term unemployment?
Who cares about long-term unemployment? Things are great!

The Dow Jones industrial average and Standard & Poor’s 500-stock index stalled after hitting record highs on Monday as investors kept their focus on economic stimulus prospects from the Federal Reserve.

Soon after trading began, the S.&P. crossed the 1,800-point mark for the first time, and the Dow industrial average surpassed 16,000 points for the first time.

In afternoon trading, the S.&P. was up just 0.1 percent, at 1,799.67 points and the Dow was up 0.4 percent, at 16,016.80; the Nasdaq composite (itself nearing 4,000 points, a level not reached since September 2000) was 0.1 percent lower, at 3,981.16.

The round numbers on major levels could provide some technical resistance at first, but clearing them could prompt more buying from investors and managers eager to chase performance.

Things are great for the people who count anyway.

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  • wengler

    I made this point on the other post: taxing these people will not be a drag on the economy. These people have restructured the New Deal economy piece by piece into some sort of Frankenstein’s monster of a pre-1933 US economy.

    These types of economies are too unstable do not work well in an era of nuclear weapons.

  • NBarnes

    Loomis, these three posts in quick succession have me questioning the wisdom of Our Galtian Overlords. What are you thinking?

  • DrDick

    The Masters of the Universe are rolling in cash, which is why there is nothing left for the rest of us.

    • Denverite

      The funny thing is that the main purpose of hording a bigger and bigger share of income and assets is to bid up the prices of luxury goods that they’d probably buy anyways (only at cheaper prices).

      • Vance Maverick

        While that’s real, I don’t think it’s the purpose or even the main effect. The experience of being on top is sweeter, for that personality, the greater the contrast to the losers.

  • jon

    It’s good that the stock market has stopped tanking and recovered. But it’s bad that nothing else has recovered. And it’s obvious that much of the public money and effort that went into shoring up the financial industry would have been better invested elsewhere.

    • I might argue that a properly functioning capitalist system would see a stock market rise and fall with general levels of unemployment. Alas.

      • Harsh Truth

        I might argue that a properly functioning capitalist system would see a stock market rise and fall with general levels of unemployment. Alas.

        “Alas” indeed!

        This is your first clue that what exists is not a properly functioning capitalist system. The DOW on a fed-induced sugar high is certainly not a functioning market.

    • joe from Lowell

      And it’s obvious that much of the public money and effort that went into shoring up the financial industry would have been better invested elsewhere.

      It’s always tough to recognize the value of a problem that was avoided, but bank runs and a complete shut down of credit would have meant a second Great Depression were not wrong. We really were heading there in late 2008.

      • Steve LaBonne

        The mistake was not shoring up the financial industry. The mistake- no, crime- is that nothing meaningful was demanded in return- neither real reform and restructuring, nor tax surcharges on the grotesque incomes that were maintained courtesy of ordinary taxpayers.

        • joe from Lowell

          Seconded.

          It’s probably safe to say that I have a higher opinion of Dodd-Frank than you do, but there is a still a yawning gap between what was done and what needed to be done.

          • Steve LaBonne

            Jury is still out on D-F. Whether it’s of real value will depend almost completely on the outcome of the rulemaking process- where advocates of genuine reform are badly outgunned by financial industry lobbyists.

            • joe from Lowell

              But even before we get to Dodd-Frank, we’ve got the design of TARP. The Bush administration did not miss the opportunity to miss an opportunity to put the house in order.

        • Confused

          Isn’t this a bit like the debt ceiling increase? When both sides know that it needs to be done, then you shouldn’t really expect to be able to extract bargaining concessions for doing it.

          Plus, you can’t really do structural reform or taxes quickly during a crisis. It would be crazy to have expected the Bush administration to start raising taxes during the peak crisis months in 2008.

          Those things should have been done, but not as part of a quid pro quo in real time on TARP or other emergency measures.

          • Bruce leroy

            He doesn’t mean concessions from Republicans; he means concessions from the financial sector

            • Confused

              That doesn’t make sense to me.
              The concessions he talks about are financial sector reform (presumably regulatory reform) and higher taxes. Those are legislative issues, not decisions that can be made by the financial sector. They can’t be negotiated with the financial sector, they are negotiated with Republicans.

    • GoDeep

      Yeah, instead of TARP shoveling $$$ to banks, TARP should’ve shoveled $$$ to homeowners to shovel to banks. It (prolly) would’ve been much more cumbersome & much more time consuming but we would’ve seen a better balance in the aftermath than what’s emerged.

      And its long time past that we’ve gotten a Nat’l Infrastructure Bank that would automatically backstop downturns in the business cycle by ramping up infrastructure spending. This would also ease the Fed’s burden of trying to keep inflation down while also promoting full employment. A NIB would’ve, frankly, taken much of the debate abt stimulus out of Congress’ hands.

      • joe from Lowell

        Except that the non-performing loans weren’t the fuel for the fire; they were just the match. All of those derivative bets would have still blown up. Homeowner assistance would have been a good policy, but it wouldn’t have stopped the cascading failures.

        +1 on the infrastructure bank, though. Sometimes this country’s government reminds me of walking into an office and seeing that the inventory system is stilling running DOS.

        • GoDeep

          But the derivative bets were based on the non-performing mortgages, no? Hence, if we restore the cash flow from those non-performing loans we would’ve accomplished the same thing. At the end of the day the derivatives market cratered b/cs the underlying cash flows cratered.

          We saw this with the AIG fiasco. Rather than bailing out Goldman Sachs directly for the $13B in credit default swaps it placed with AIG, the NY Fed simply bailed out AIG, instantly erasing the $13B loss Goldman Sachs would have otherwise faced. We could’ve done this with individual homeowners, too.

          • joe from Lowell

            But the derivative bets were based on the non-performing mortgages, no? Hence, if we restore the cash flow from those non-performing loans we would’ve accomplished the same thing.

            For some of them, yes, but not enough to prevent the cascading failures. It would have been like blowing out the match after the hay stack was already ablaze. A set of B which set of C which set off D, and even if you took care of A at this point, B through D already happened. A lot of those side bets wouldn’t have been fixed by bringing the ratio of performing loans back up. They way they were set up, the shock wave went through the system, and turning off the source wouldn’t recall the wave.

            Trillions of dollars in bets weren’t actually about the substantive issue of underlying cash flow, but about what would happen to these particular bets at this particular time. If it had just been about the MBSs, homeowner help would have arrested the problem, but the bets on the bets on the bets on the MBSs had already been lost.

        • efgoldman

          and seeing that the inventory system is stilling running DOS.

          DOS my ass. The government is still running on keeping inventory in manual notebooks, like we did at Lechmere Sales 50 years ago.

          • joe from Lowell

            Woot Lechmere shout-out woot!

            What happened to them? Bought by someone?

            • Anonymous

              victim of montgomery ward’s bankruptcy.

  • gratuitous

    All of which still has me scratching my head over why the overrich continue to squeal like stuck pigs every time they’re asked to loot just a little less (to say nothing of the non-existent demand that they actually pay more to support the system that’s granted and guaranteed such fabulous wealth) from the workers creating all this Wealth.

    Maybe if there was a voice in the popular media that wasn’t owned by a multi-millionaire?

    • joe from Lowell

      My theory: because it’s not about the money.

      It’s about objecting in principle to being answerable. It’s about wanting to be the boss, wanting to have no boss.

      • Denverite

        One part bidding up the price of luxury goods, one part residual Calvinism whereby success in like means you are favored by the almighty, one part the psychoses that rich people tend to have (regardless of which way the causal arrow points on that one).

    • Steve LaBonne

      Orwell had a wonderful phrase for the millionaires and their “journalists”- “the rich and their hired liars and bumsuckers”. Can’t remember which essay that’s in and I’m too lazy to look it up.

  • Julia Grey

    One word: sell.

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