economy

Something that I've pointed out conversationally several times over the course of the bailout dialogue has been that the question shouldn't be "can we afford it?" The question has to be "Can we afford not to do it?" This was evidenced in real terms by the Dow closing down nearly 800 points yesterday. Bailout = approximately $700 billion, with the possibility of getting some of that back. No bailout = $1.1 trillion in lost market value (taking into consideration Nasdaq and S&P losses). Of course, the market has rebounded a bit today, but don't think that means things are okay. That's just investors grabbing some (perceived?) deals and being optimistic that there might be another vote this week.

The bailout bill fails 228-205 (link goes to roll call). Per Paul Krugman:

So what we now have is non-functional government in the face of a major crisis, because Congress includes a quorum of crazies and nobody trusts the White House an inch. As a friend said last night, we’ve become a banana republic with nukes.

Dow is off 681 as of posting time (moving between 500-700 off). What an unbelievable clusterfuck.

I've been busy with multiple things to really post appropriately on any recent events, but this is too important not to at least drop a note. The bailout, as it stands has three major problems, which have been voiced in many other circles (particularly by economists), but I just wanted to add to it:

1. There must be a public equity stake for the amount of money that is being injected. That's what was good about the AIG deal and stinks about this one, almost as much as point 3 below.
2. There should be something on executive compensation. Although if there is a negotiating point, this is the one to give on. I know that will piss a lot of people off, but the simple fact of the matter is that the individual compensation is a drop in the ocean compared to the bigger issues. I am also skeptical of ever being able to close all the possible loopholes. Legislating golden parachutes could take years.

Okay, it's a stretch, but Starbucks is closing 600 stores due to the economic downturn and the economic downturn is very related to the current price of oil. It's a great indicator of our excess that we were willing to pay $4-5 for a faux-coffee milkshake in the first place.

And the coffee still sucks. Long live the street coffee cart! Or... something.

Unless you've been under a rock, you're aware that oil had its largest ever one day increase in price to $139 a barrel yesterday. In the realm of "least of all possible evils," I'm glad this is happening now.

The world, and especially the US, has spent way too much time playing the hear-no-evil, see-no-evil, speak-no-evil game when it comes to oil. Even if you don't buy the basic notion of peak oil, it's hard to question at this point that with the industrial growth in India, China, and even other places like Brazil, that we cannot continue to afford our usage level.