Quantitative Easing, Round II, Approved
The Federal Reserve announced today that it would embark on a second round of “quantitative easing”, to the tune of $600 billion. This will join the previous round of $1.3 trillion over the last 18 months. For those of you who don’t know, Quantitative Easing is a monetary policy transaction, whereby the Federal Reserve buys securities from banks–usually US Treasury Notes and Bonds–with cash. This infuses fresh cash into the monetary system. After this second round of Quantitative Easing, the Fed will have injected $1.9 TRILLION in cash into the monetary system.
Now, sadly, the Fed did not, and does not, just have $1.9 trillion in cash lying around in big vaults to take Scrooge McDuck money swims in when the mood takes them. But that’s not particularly a problem, since the Federal Reserve simply prints up the required amount of cash (or creates it electronically for funds transfers). In any event, the Fed buys the securities with money that is newly made for that purpose.
With that in mind, my advice to you is to collect all of the printed currency you can. You will then need to package it in extremely tightly-wrapped bundles. Yes, it is a bit troublesome to do, but you’ll find that it burns much longer and hotter that way, which works far better for either cooking or heating purposes.
Have you spotted the evolving narrative yet?
Today at his press conference, President Obama claimed that people may have been confused by what he did early on with the massive spending because it was an “emergency” and he had to do something quickly. Or said another way, he rushed everything through as quickly as he could – despite his promises – because the situation demanded it. It wasn’t because he wanted too – it was because he had too.
You know, like the pure pork stimulus bill, most of which was scheduled to be spent in later years. And, of course, although many would like to lay TARP completely at Bush’s feet it should be remembered it was a Democratic Congress that passed that and Obama voted yes.
The point this new meme, of course is to cast himself as much more of a deficit hawk who was put in the position of saving the world (and his reaction argues against any claim of being a deficit hawk, by the way) – the emergency he continued to talk about today.
Timothy Egan at the NYT employs a variation on the theme in an article hilariously entitled, “How Obama saved Capitalism and lost the midterms”. No. Really – that’s his claim. Obama saved Capitalism. Because intruding on the natural processes of capitalism and not allowing them to take their natural course actually saves capitalism from, well, I suppose capitalism.
Yeah, it’s a pretty funny in a weird sort of NYT kind of way.
Most, except perhaps Egan, understand that capitalism isn’t something that “fails”. It is as much a process as anything and it is built upon the trillions of private individual interactions that voluntarily happen daily. What Egan claims Obama did isn’t at all true. What Obama did was prop up crony capitalism by bailing out institutions that had been incentivized by government to behave badly. End of story. And then he went on to prop up manufacturers (car companies) that had been managed badly and were failing all on their own. Neither action has a thing to do with capitalism per se. Markets reward success and are brutal to failure. Propping up failure has nothing to do with markets and thus nothing to do with market capitalism. Had both GM and Chrysler gone under, the best parts would have emerged under some other car company. The fact is we’d still be going cars today had they gone under, just not those cars.
Obama may not have been among those who created the incentives that created the financial problems – although it was rather disappointing to see one of them win reelection in MA – but the fact remains that at base, Obama was using borrowed money to keep the government/private bank scam it precipitated from collapsing the whole economy as the bubble they’d created burst. Again, that’s not a problem of capitalism.
So Egan’s premise? Well, it’s simply nonsense.
On the eve of the day after a “shellacking” as Obama called it during the presser, I suppose the left is looking for any silver lining it can find. Even if it is to be found in that for which they claim the president supposedly didn’t get proper credit. Egan might have had a slight chance at credibility if he’d claimed that the “emergency” actions of the Obama administration had kept the recession from being deeper – that’s at least debatable.
But saving Capitalism?
That’s just ignorance on a stick.
~McQ
Election Reflections
I have a few random thoughts about the midterm election results.
You never run the table. You always lose a race or two where you th ought you were strong. But what was odd about last night is how the Republican wave simply crashed against the Pacific time zone. After turning over the Senate seats in Pennsylvania, and especially in the blue states of Wisconsin and Michigan, it’s hard to believe that the Democrats kept Colorado, Washington, and Nevada intact. There was every indication that two of those states were going to go Republican. That they didn’t is just puzzling.
There hasn’t been a mid-term House turnover this sweeping since 1938, when a Republican tide essentially ended the New Deal. The 65-seat gain for Republicans means that the Democrats lost more house seats than the Republicans did in 2006 and 2008 combined.
CNN is projecting the final Republican House seat tally will be 243. I predicted 247 (+/-3). So, I missed it by one seat. This means that, of the 43 toss-up seats, more than half broke for the Democrats. This is the reverse of historical trend, which is that about 55% of toss-up seats break for the majority party. Again, you never run the table.
The less-reported results from last night is that Republicans really swept up at the state level. As Erick Erickson wraps it up:
There will be 18 states subject to reapportionment. The Republicans will control a majority of those — at least ten and maybe a dozen or more. More significantly, a minimum of seventeen state legislative houses have flipped to the Republican Party.
The North Carolina Legislature is Republican for the first time since 1870. Yes, that is Eighteen Seventy.
The Alabama Legislature is Republican for the first time since 1876.
For those saying this is nothing because it is the South, consider these:
The entire Wisconsin and New Hampshire legislatures have flipped to the GOP by wide margins.
The State Houses in Indiana, Pennsylvania, Michigan, Ohio, Iowa, Montana, and Colorado flipped to the GOP.
The Maine and Minnesota Senates flipped to the GOP.
The Texas and Tennessee Houses went from virtually tied to massive Republican gains. The gains in Texas were so big that the Republicans no longer need the Democrats to get state constitutional amendments out of the state legislature.
These gains go all the way down to the municipal level across the nation. That did not happen even in 1994.
That really is a massive change at the state level, and even traditionally blue states were swept up in it. Since the next legislative session in many of these states will address reapportionment, that has further implications for the next election cycle, when House seats get shuffled.
Lots of new Republican governors in what have been blue states means that the 2012 Republican nominee now has access to pre-existing ground organizations in those states, which did not exist for the last three presidential election cycles. That means that the nominee will have to spend less in those states to create a ground game from scratch. That’s not necessarily an election-winning advantage, but it’s and advantage that hasn’t existed in those states for quite a while.
Democrats, including the president, are just impervious to any suggestion that their policies contributed to these losses. They are saying is was all about jobs and the economy, as if their policies had nothing to do with either. It’s really a willful blindness.
The California electorate is just…wacky. Take a look at the proposition results. They voted to refuse an $18 vehicle registration surcharge. They refused to allow the state to take local transportation and other funds, and voted to require a 2/3 majority for “fee” increases by reclassifying them–properly–as taxes. They then elected to allow the legislature to pass a budget by simple majority vote, which will, in many cases, effectively invalidate the other propositions through the budget process. Republican senators and assemblymen now have essentially no reason to attend the legislative sessions in Sacramento.
Jerry Brown will now teach another generation of Californians what the term “Governor Moonbeam” means. In his victory speech, he sounded quite mad. Now that he has a majority budget vote in the legislature, I have no confidence that the result will be anything other than a financial meltdown in California. The Democrats in California are addicted to spending–mainly in the form of generous benefits to teachers, firefighters, cops, and other government workers. with a $19 billion deficit, such spending can only be financed by either massive borrowing or massive taxation. Neither choice can possibly end in a positive economic outcome for the state. It will, however, teach the country an instructive lesson about what happens when you turn the government over to aging hippies.
California has greatly increased the chance that it will require a massive rescue from the Federal government, at the very same time that the general electorate has chosen a Congress that will be much less likely to approve such a rescue. So, aging hippies will now be taught an instructive lesson about the nature of reality versus ideology.
Election post-mortem
An incredible election night by any measure. The obvious question that pundits will be concentrating on is “what does it mean”?
Well I think there is consensus on both sides that it doesn’t mean that the voters love Republicans. Even establishment Republicans are acknowledging that fact. And Marco Rubio made that clear in his acceptance speech where he called this a “second chance” not an embrace of the GOP.
So that leaves us with a number of other options to consider. What needs to be kept in mind is this is the third consecutive wave election and in each case the party holding the White House suffered losses. That’s unprecedented. And this particular midterm is the largest shift of seats since 1936 (update: House numbers now have a projected 242 seats on the GOP side, a net of +64 – historic or as one Democrat strategist said, a defeat for Democrats of “biblical proportion”). So one meme that isn’t going to fly is this election is “no big deal”. Democrats got spanked and got spanked hard. They have a lot of work to do to win back voters.
Another thing that seems to be a developing narrative is that this is a repudiation of the Obama agenda. I think that’s true to an extent. The biggest driver of the dissatisfaction with Democrats is the health care law as indicated by polls. And they are certainly mad about the deficit spending. But as Charles Krauthammer said last night, “this isn’t a failure of communication by the Democrats, this is a failure of policy”. So it would seem that at least part of the vote was a repudiation of the president despite claims by some on the left that its only about the economy.
That said, part of it is also about the economy. Historically the party in power doesn’t do well in a down economy. So that too must be factored in to the formula. While much of that is beyond government’s control, that which it could impact was perceived as poorly done. Very poorly done. That exacerbated the loss. And, with the focus on health care reform, most Americans thought that the legislative priorities were wrong as well. Voters have historically turned to the GOP to handle economic matters. But this is still no mandate for the GOP.
Finally voter anger hasn’t gone anywhere, it’s just taking a breather. Again, watch the direction of the country polls over the coming two years. It’s an interesting set up in DC now. Democrats actually would have been better off if the Senate had gone to the Republicans. They still control it and the Presidency and that leaves the onus on them as we head toward 2012. It also gives the GOP a free hand to pass whatever it wants in the House, regardless of where it goes, if anywhere, and make the case that they tried to reform what the people wanted reformed and Democrats (in the Senate and the President) stood in their way (reverse the “obstructionists” claim).
I think, after last night, that 2012 is definitely in play. It will be interesting to see how both parties react. I’m eagerly awaiting the Obama presser at 1 pm today when we’ll hear the first reaction from the President. But as always with him, judge him by his actions, not his words. His words have become empty rhetoric that many times doesn’t support what he ends up doing.
~McQ
First some numbers
Well first a little prediction validation. The House – I said “196/239 GOP – a solid majority.” There are still some races to be finalized, but the Republican count presently sits at 239. I’m no Nate Silver, but I’m pretty pleased with that.
On the Senate, I said “final tally 51/49 Dems. +8 for the GOP”. It stands at +6 with the Washington and Colorado races to go. Unfortunately I think the Dems will end up taking both of those.
I didn’t do governors here, but at another site, Liberty Pundits, I said the GOP would go 31 –18-1 in total governorships. Right now it stands at 27 – 15 – 1 with 7 yet to be called. In those 7, 4 have the GOP candidate with a slight lead and 3 have Dems with a slight lead. If they finish that way, the total will be 31-18-1.
Some numbers no one paid much attention too but are tied in with the governors races – what happened in some statehouses. Don’t forget this is a reapportionment year since we’ve had a census. So the GOP has positioned itself very well with the governorships it has won (or will win). Yesterday, movement in state legislatures all went to the right.
State Senates shifting control from [Democrats to Republican]: MN, WI, ME, NH, NY, NC, AL. From [GOP to Democrats]– zero. State Houses shifting control from [Democrats to Republicans]: ME, NH, PA, OH, IN, MI, WI, IA, OR, NC, AL. From [GOP to Democrats]– zero.
That’s big.
More to come.
~McQ