The Obama Era starts this week with a lot of tears and idealism and hope. We don’t discount the historical magnitude of Obama’s win, and in fact, we’re a bit caught up in the moment right now as you can see by our Obamafied logo in the rotation. But to those who are looking to a wand-waving omniscient economic team, just remember that getting the economy back on track is going to be—in the words of the outgoing administration’s original Defense Secretary—a long, hard slog.
That’s why we dedicate a Queens of The Stone Age hit of the previous era to all the idealists who think the new economic team know exactly what to do. Like the familiar and indisputably awesome song says: No One Knows how exactly to get out of this. Below are links to add this essential rock anthem to your collection, as well as a few additional thoughts on the topic … not that we know.
[iTunes] [Amazon MP3]
When Washington is involved, you can be damn sure that no one knows what the outcome will be. There are simply too many political agendas to manage, and opposing political leaders will go to great lengths to discredit decisions proposed by either side.
What we have coming is the second $350b wave of the TARP to be allocated—will it be used to buy up illiquid bank assets as originally proposed? Or will it be used to continue to recapitalize banks only this time with a stipulation that banks must use the money to lend back to businesses and consumers rather than buying other banks or rebuilding reserves?
We also have of Treasury and mortgage bond buying by the Fed in the trillions, a proposed $850b stimulus package that can be sliced and diced any number of ways as it’s debated in Congress, and a completely separate ‘bad bank’ bailout package brewing. Meanwhile the 2.6m in job losses that mounted in 2008 are likely to continue until all of this can be sorted out.
The good news is that there really is a great economic team with Ben Berkanke continuing as Fed head; Tim Geithner, former New York Fed head, as Treasury Secretary; Paul Volcker and Larry Summers, former Fed and Treasury heads respectively as top advisers; Sheila Bair continuing as head of FDIC; and veteran watchdog Mary Shapiro as new SEC head.
But as we all learned last Fall as the entire financial system was wobbling, not even the smartest rule makers can solve things right away. Because political promises and plans are one thing, whether they actually work is another. Just like the song says:
We get some rules to follow
That and this
These and those
No one knows
We get these pills to swallow
How they stick
In your throat
Tastes like gold