The Economy Guy

Stocks soared 200 points as elation was created by the Stimulus Package – it passed the Congressional vote.

Bonds backed off (increased interest rates) as it justly decided the package was inflationary.

The Dollar, oil and gas went sideways.

Gold fell below $900 to $890/ounce.  This market will take a little longer to rally.

In the news today…..

The Stimulus Package is the news for today.  

What is a Stimulus Package.  Well, I bet you think a stimulus package is one that kicks the US economy into gear, and pulls us out of this deep recession – right???  Well, Congress doesn’t think the way you do.  They kind of ignore the word “Stimulus” and think of “Pork” instead.  So I believe that the House thinks this is a Pork Package.

The Democratic House is plugging in all their favorite “earmarks” and these are being opposed by Republicans.  The House version of the stimulus package is much less than 25% stimulus, and much more than 75% pork.  What a joke.  (I want to take this opportunity to remind all readers that VOTERS put these clowns in the House.)  The Senate has an entirely different version of the plan, and it will be interesting to see how this all turns out.  There should be a lot more compromises – probably due to Senate action before a bill goes to the President for signature.  It isn’t worth talking about the details here as they aren’t set in concrete yet.  An interesting side play is the President Obama doesn’t agree with the House Democrat’s idea of “stimulus” and does want things in the package that truly stimulate the economy.  But, will he get it?

However, it is worth talking about “multipliers” as they apply to the stimulus package.  If a dollar is spent through the stimulus package, it can have a multiplier effect on the  amount of the dollars pushed into the economy.  Here is what I’ve found from the Obama economic advisors:

1. A Dollar spent on buying things has a multiplier of one – that dollar causes one dollar of stimulus
2. A Dollar spent through tax reduction has a multiplier of three – that dollar causes three dollars of stimulus.
3. A Dollar spent on “pork” has a multiplier of zero – that dollar causes zero dollars of stimulus

The choice between these two types of stimulus is political.
 

Here are Today’s numbers:
Dow Jones 30 Industrial – 8375 (up 210 points)
10 Year Treasury Bond – 2.66% (up 0.14%)
Euro – $1.3121
Gold – $890 (down $11)
Oil – $42.16 (up $0.58)
Gasoline – $1.18 (up $0.08)