Comments on: GDP Goosed By TARP (Maybe)

By: AGG

AGG — Tue, 03 Feb 2009 04:45:02 +0000

I’ve just had one of theose “light bulb” moments when it seems like the financial problems we have are clear and solvable. TARP was a trigger event which convinced a huge number of people that we are in dire financial straights. The 90% of the people stopped spending and started saving for the following two reasons:
1) The upper 10% who benfit from all the lower 90%’s purchases had squandered the profits and wanted the lower 90% to subsidize them.
2) The lower 90% realized that the upper 10% are in firm control of the government so no help is coming.

This panics the upper 10% because it flips Ayn Rand rich psycho phsychology on its’ head. Take the following quote which is the justification of the rich for lacking compassion:

“When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it.” John Gault/Ayn Rand

Now look at the same quote in the present TARP context:

When 10% (the rich) of the people get the idea that they do not have to work because the other 90% is going to take care of them (i.e. do all the work), and when the 90% gets the idea that it does no good to work because the upper 10% is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it.
You see, Ayn, we know what you, Greenspan and the Paulson types wanted all along; Own the government and fuck the people while you elite bastards sit back and bitch about how little we work. It’s pay back time. The lower 90% is ready and willing to work. However, you upper 10% will have to get used to paying us for it.

By: Reinko

Reinko — Mon, 02 Feb 2009 23:31:10 +0000

There is a lot of talk going around if TARP funds pump up the USA GDP.

There is not much proof in this; lets quote from the technical note from BEA that once more proofs it is debt that rules and nothing but debt:

This
treatment is consistent with the recommendations of the newly updated
international guidelines, System of National Accounts 2008. For the fourth
quarter, in most cases BEA’s estimates of these capital transfers are based on
Congressional Budget Office estimates, which are prepared on a net present
value basis. The recording of a capital transfer in the GDP accounts does not
affect GDP or net government saving, but does reduce net government lending
or borrowing.

Source:

http://www.bea.gov/newsreleases/national/gdp/2009/tech408a.htm

We see: just another monkey coming out of the sleeve of US debt, no artificial GDP pumping up but the decade old minimizing the debt is what we observe…

By: mkkby

mkkby — Mon, 02 Feb 2009 20:18:56 +0000

My favorite restaurants were nearly empty in Q4, now they are full again. There was extreme fear the last 2 quarters of ‘08 because the headlines were full of banks failing, somber politicians, and total uncertainty of what centuries old blue-chip institution would fail next. That fear and uncertainty has come down now. I wouldn’t be surprised if we remain in mild recession for several more quarters, but realize that the worst is over.

By: DL

DL — Mon, 02 Feb 2009 19:30:30 +0000

Paul Krugman on bank bailouts:

http://www.nytimes.com/2009/02/02/opinion/02krugman.html?_r=2&ref=opinion

Krugman is against Obama’s plan, which will reward stockholders and bondholders at the expense of taxpayers.

I usually don’t agree with Krugman; but in this case I’m glad to see that the taxpayers’ interest is of concern to him.

By: johnhaskell

johnhaskell — Mon, 02 Feb 2009 18:19:19 +0000

dogtown- thanks.

I guess the reason I thought this post didn’t make sense is because… it didn’t make sense.

By: dogtownsurfer

dogtownsurfer — Mon, 02 Feb 2009 18:11:07 +0000

Barry – just got off the phone with Brent Moulton, the author of the technical note on 4Q08 GDP you cited, and he confirmed that the line item your are referring to absolutely, positively does not get included when calculating GDP. So, either the BEA is lying about how they calculate the number or your buddy gave you some bad info. You may want to check this one out further.

Keep up the good work.

By: super_trooper

super_trooper — Mon, 02 Feb 2009 17:25:10 +0000

I don’t follow the argument. You’re suggesting that TARP ($270) would have added 7% to the GDP in Q4. You really think the economy would have dropped 10.8% (-7-3.8) Q4? More likely, we’re seeing some of the $350b seeping indirectly back into the economy contributing 1% to GDP (-3.8% rather than the expected -5%).

By: adamj

adamj — Mon, 02 Feb 2009 17:14:14 +0000

The CBO already said that the first money spent in TARP cost an estimated 68Billion in Subsidies……that would mean they bought them at ABOVE market prices….so how are they saying they bought them at a discount?

By: rex

rex — Mon, 02 Feb 2009 17:13:44 +0000

Barry:
You’re just wrong about this. A Commerce Department official confirms that the TARP investments are being booked on the government’s accounts, but there is no impact on GDP from these investments. Capital flows are not part of GDP, which is a measure of output and spending.
The technical note you quote also says clearly that “The recording of a capital transfer in the GDP accounts does not affect GDP or net government saving, but does reduce net government lending or borrowing.”

–Rex

By: Winston Munn

Winston Munn — Mon, 02 Feb 2009 17:08:12 +0000

“BEA records a portion of the purchase as a capital transfer, calculated as the difference between the actual price paid for the financial asset and an estimate of its market value. ”

It makes sense to me that a mark-to-make-believe asset would improve a fantasy-league GDP.