Is the recovery fueled by gov stimulus?

Anonymous1987

Spotted an article on how US personal incomes fell 1.3% in May. This is attributed to slowing US stimulus payments.

http://www.ft.com/cms/s/0/ea8012ca-80f7-11de-92e7-00144feabdc0.html

This begs the question is the US even recovering? It seems everything is dependent on the stimulus.

Also is the US government simply hoping to inject large amounts of cash into the economy to prop up the system so as to ride out the credit storm?

Économiste Monétaire

I doubt that. Last time I checked, less than 10% of the stimulus has been paid out.

Anonymous1987

Initially I thought that but I didn't know the figures, I remember reading before that most of stimulus was back loaded to 2010. Guess it was a slow day for news. Still we are left we explaining falling incomes, I guess unemployment and business cut backs might account for the majority of it.

eamonnm79

Économiste Monétaire wrote: »

I doubt that. Last time I checked, less than 10% of the stimulus has been paid out.

But why are they talking about needing a second stimulus then?

Économiste Monétaire

Anonymous1987 wrote: »

Initially I thought that but I didn't know the figures, I remember reading before that most of stimulus was back loaded to 2010. Guess it was a slow day for news. Still we are left we explaining falling incomes, I guess unemployment and business cut backs might account for the majority of it.

http://www.recovery.gov/?q=content/report-progress

$73bn paid out, nearly $200bn in commitments. Here's some of the numbers from the personal income and outlays release that you can look at, link.

eamonnm79 wrote: »

But why are they talking about needing a second stimulus then?

I believe that idea from Romer was shot down by Obama a few days later. I wouldn't be surprised if it popped up again around late 2010/early 2011 if growth and unemployment numbers are sluggish.

porte

Is the recovery fueled by gov stimulus?
More like the recovery is fueled by gov bull****e.

FridaysWell

Apart from the financial and automotive industries, what other sectors are set to benefit the most form the US gov stimulus package?

I read up on it, looks like financial and automotive really, am i wrong?? need help!!

Flamed Diving

porte wrote: »

Is the recovery fueled by gov stimulus?
More like the recovery is fueled by gov bull****e.

Good points, well made.

eamonnm79

FridaysWell wrote: »

Apart from the financial and automotive industries, what other sectors are set to benefit the most form the US gov stimulus package?

I read up on it, looks like financial and automotive really, am i wrong?? need help!!

Every Pulicly listed company.
There are reports that the Fed is investing (pumping recently invented money) heavily in Stocks and is a major reason for the reacent rallly.

Économiste Monétaire

eamonnm79 wrote: »

Every Pulicly listed company.
There are reports that the Fed is investing (pumping recently invented money) heavily in Stocks and is a major reason for the reacent rallly.

Source?

FridaysWell

eamonnm79 wrote: »

Every Pulicly listed company.
There are reports that the Fed is investing (pumping recently invented money) heavily in Stocks and is a major reason for the reacent rallly.

Thanks Eammonnm79. You sure though? Doesn't sound like a good idea if evryone is getting it.

Flamed Diving

Économiste Monétaire wrote: »

Source?

Seconded.

1huge1

Would that explain the rally of stocks recently though, like the asian markets for example? I know they rely on the US to do well a lot of the time but as the others said
Source.

Flamed Diving

If eamonn hasn't responded by this evening, it is safe to say the story is entirely fictitious.

Anonymous1987

Did a bit of research out of curiosity and found this, Bank support is in red and auto industry is blue.

March 2008: Bush stimulus $29 billion for Bear Stearns/JP Morgan Chase deal
May 2008: Bush stimulus $178 billion in tax rebate checks
July 2008: Bush stimulus $300 billion for distressed homeowners
July 2008: Bush stimulus $200 billion for Fannie Mae and Freddie Mac
September 2008: Bush stimulus $50 billion to guarantee money market funds
September 2008: Bush stimulus $25 billion to Big 3 automakers
September-November 2008: Bush stimulus $150 billion to AIG
October 2008: Bush stimulus $700 billion to banks (TARP)
February 2009: Obama stimulus $787 billion in broad stimulus package
February 2009: Obama stimulus $75 billion for distressed homeowners
February 2009: Obama stimulus $200 billion for Fannie Mae and Freddie Mac*
March 2009: Obama stimulus $30 billion for AIG
March 2009: Obama Stimulus $15 billion for small business lending
March 2009: Obama Stimulus $1 trillion to get toxic assets off bank’s troubled asset sheets
March 2009: Obama Stimulus $22 billion for Big 3 Automakers Chrysler and GM

*Not sure is this is double counting from Bushes stimulus so I didn't include it in the totals

Totals come to:

Financial Industry: 2.158 Trillion (~61%)
Auto Industry: 47 billion (~1.3%)
General Economy: 1.355 Trillion (~38%)
Total 3.561 Trillion

So the financial industry is getting the most support from the government with the auto industry getting a relatively minuscule level of support and the general economy the rest. Given the trouble is the financial industry this should be no surprise.

If you look here you will find the $787bn stimulus is distributed largely as tax relief but also to strategic areas such as Education, Health, Infrastructure, State and local fiscal relief and Energy. Seems to be investment in government dominated sectors with the hope that aiding the financial sector will stimulate the general economy I guess.

FridaysWell

Anonymous1987 wrote: »

Did a bit of research out of curiosity and found this, Bank support is in red and auto industry is blue.

March 2008: Bush stimulus $29 billion for Bear Stearns/JP Morgan Chase deal
May 2008: Bush stimulus $178 billion in tax rebate checks
July 2008: Bush stimulus $300 billion for distressed homeowners
July 2008: Bush stimulus $200 billion for Fannie Mae and Freddie Mac
September 2008: Bush stimulus $50 billion to guarantee money market funds
September 2008: Bush stimulus $25 billion to Big 3 automakers
September-November 2008: Bush stimulus $150 billion to AIG
October 2008: Bush stimulus $700 billion to banks (TARP)
February 2009: Obama stimulus $787 billion in broad stimulus package
February 2009: Obama stimulus $75 billion for distressed homeowners
February 2009: Obama stimulus $200 billion for Fannie Mae and Freddie Mac*
March 2009: Obama stimulus $30 billion for AIG
March 2009: Obama Stimulus $15 billion for small business lending
March 2009: Obama Stimulus $1 trillion to get toxic assets off bank’s troubled asset sheets
March 2009: Obama Stimulus $22 billion for Big 3 Automakers Chrysler and GM so I left it out of the total below

*Not sure is this is double counting from Bushes stimulus so I didn't include it in the totals

Totals come to:

Financial Industry: 2.158 Trillion (~61%)
Auto Industry: 47 billion (~1.3%)
General Economy: 1.355 Trillion (~38%)
Total 3.561 Trillion

So the financial industry is getting the most support from the government with the auto industry getting a relatively minuscule level of support and the general economy the rest. Given the trouble is the financial industry this should be no surprise.

If you look here you will find the $787bn stimulus is distributed largely as tax relief but also to strategic areas such as Education, Health, Infrastructure, State and local fiscal relief and Energy. Seems to be investment in government dominated sectors with the hope that aiding the financial sector will stimulate the general economy I guess.

Thanks anon87 nice and clear

eamonnm79

The British government recently released a pamphlete on quantitive easing.
It clearly states the the method they will be using to put the quantitive easing money in to the economy will be buy buying shares in uk companies.

When reporters talk about the dangers of the market recovering too quickly what do you think they mean?

Where do you people think the QE money is going in America?
Its very hard to give a source when the fed refuse to even let congress know how much they printing and where it is going.

Flamed Diving

eamonnm79 wrote: »

Every Pulicly listed company.
There are reports that the Fed is investing (pumping recently invented money) heavily in Stocks and is a major reason for the reacent rallly.

Économiste Monétaire wrote: »

Source?

eamonnm79 wrote: »

The British government recently released a pamphlete on quantitive easing.

It clearly states the the method they will be using to put the quantitive easing money in to the economy will be buy buying shares in uk companies.

When reporters talk about the dangers of the market recovering too quickly what do you think they mean?

Where do you people think the QE money is going in America?

Its very hard to give a source when the fed refuse to even let congress know how much they printing and where it is going.

Two points:

1) UK is not the US.

2) That isn't a source. That is speculation.

Économiste Monétaire

eamonnm79 wrote: »

The British government recently released a pamphlete on quantitive easing.
It clearly states the the method they will be using to put the quantitive easing money in to the economy will be buy buying shares in uk companies.

When reporters talk about the dangers of the market recovering too quickly what do you think they mean?

Where do you people think the QE money is going in America?
Its very hard to give a source when the fed refuse to even let congress know how much they printing and where it is going.

Where in that pamphlet does it explicitly state that the Bank of England will directly purchase shares in listed companies? I can't find it. So far, the BoE has purchased £130.771bn in Gilts (British government bonds), £1.769bn in CP, and £928mn in corporate debt. Nothing there about the BoE buying equity in publicly listed companies.

Here's the Fed's balance sheet:
http://www.federalreserve.gov/releases/h41/Current/

Show me where the Fed is "investing (pumping recently invented money) heavily in Stocks".

Anonymous1987

eamonnm79 wrote: »

The British government recently released a pamphlete on quantitive easing.
It clearly states the the method they will be using to put the quantitive easing money in to the economy will be buy buying shares in uk companies.

When reporters talk about the dangers of the market recovering too quickly what do you think they mean?

Clearly the inflationary fear is there but have a look at inflation in the UK (CPI is probably the best indicator):



After reaching approximately 5% it has fallen back to the desirable level of 2% so for the present anyway there is no danger.

eamonnm79 wrote: »

Where do you people think the QE money is going in America?

Its very hard to give a source when the fed refuse to even let congress know how much they printing and where it is going.

The Fed is introducing liquidity into the financial system preventing the credit crunch we saw in 2007.

From the Federal Open Market Committee Press Release

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

This seems like a pretty explicit announcement on how much money is being introduced into the system and where it's going.

damnyanks

I've been of two thoughts really,

Since two quarters before summer 07, I reviewed a lot of reports discussing the up and coming housing collapse and recession. They predicted it would last two years. This so far seems to hold true. However the reports not once mentioned serious government interference such as now.

However I'm concerned that the government involvement has simply started another bubble and in four or five years we will see this bubble pop. I haven't looked into numbers at all, just casual reading in papers etc. but I've not seen much growth for SME's yet.

zod

https://www.youtube.com/watch?v=FFhWIUTF1IM