Wednesday, February 25, 2009

Barack Obama's speech to Congress

I heard the economist Professor Ed Leamer's rapturous appreciation of the Obama speech (& here, here, here, here) (on the 7-30 Report) before I saw the speech myself.  But this is an inspiring speech on a par with anything by J.F. Kennedy.  Obama sees the need for a stimulus and the need for offsetting the debt implications of the stimulus. I don't know if he can do this but the framework is right and the speech is a skilled effort that will help pull America out of a pessimistic hole.  In fact, however, Wall Street headed lower after the speech but this trend was - as in recent days - driven by frustration with the inability of investors to see a way out for the US banks.

BTW, Leamer was the first major forecaster to warn of the US housing bubble.  I couldn't find a transcript of his remarks tonight but he was surprisingly optimistic.  Leamer sees the tough times now as storing up a lot of latent demand for cars and housing.  Indeed he sees the US economy rebounding strongly in a couple of quarters with even the housing sector recovering strongly.  I find this difficult to understand given the pervasive rottenness of US credit markets.  It is not only an issue of a short-term downturn in demand. Ben Bernanke sees the problem - the US can return to growth this year provided that the financial system is put in order.  Its a monumentally big proviso given that the debt binge lasted for more than a decade.

1 comment:

jc said...

It was a well delivered speech selling a shitty message. The idea that you can borrow money to get out of a hole because you have too borrowed money is about as sensible as George Costanza.

The stock market has tanked every time he or his Treasury sec make a speech.