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[18 Aug 2010 | No Comment | ]

Politics and economics don’t mix well. When unemployment is high, no politician in their right mind would say “things are getting better” – even if they are. And when your party is out of power, no matter what the economy is doing, it’s always good to point out some data, or forecast, or sector that is not doing well. As a result, there is no political constituency for economic optimism and this has created an awfully pessimistic environment.

Add to this political quagmire the largest pool of …

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[12 Aug 2010 | No Comment | ]

Christina Romer, the Chairwoman of president Obama’s Council of Economic Advisers has announced her resignation. While some people say her departure is a sign of deep divisions in the Obama team, we take her comments, about getting along with Larry Summers and enjoying every minute of her tenure, at face value. You, of course, can decide for yourself.
Romer’s infamous forecast that the $800 billion Obama stimulus bill would keep the unemployment rate at or below 8% will go down in history as one of the worst by any …

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[4 Aug 2010 | One Comment | ]

• On Wednesday (July 28), Bloomberg News reported that Quinn budget director David Vaught had predicted during an interview that, in January, Illinois lawmakers would raise the income tax by 2 percentage points. Quinn, in full damage control mode, on Thursday admonished Vaught for speaking out of turn, said Vaught’s remark was “misconstrued” and added that a Bloomberg reporter from out of state didn’t understand what Vaught said. Quinn reiterated his support for a 1 percent income tax increase — sorry, a 1 percent surcharge for education — and added …

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[3 Aug 2010 | No Comment | ]

Think back a month. Remember when first quarter real GDP was downwardly revised from a 3.0% growth rate to 2.7%? The pessimistic punditry had a field day.

Well…guess what? On Friday, when second quarter GDP was released showing a 2.4% growth rate, the celebration was so raucous that the pessimists totally missed a huge upward revision to the first quarter. The Commerce Department raised first quarter growth to 3.7%.
But, rather than back off the negativity a little bit, the pessimists use the faster growth of the first …

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[24 Jul 2010 | No Comment | ]

Running an auto firm is undoubtedly much harder than it looks–and it looks pretty hard.  But would it be crazy to suggest that, rather than using high-rate loans to goose sales in advance of a shotgun IPO, GM could take some time and concentrate on, I don’t know, making cars that people want to buy even if they can’t get bad lease deals?

On the government side, it’s even odder.  Pushing GM back into the subprime credit market seems to raise the odds that GM is eventually going to require another …

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[11 Jul 2010 | No Comment | ]

Want to be invited to “A” list parties? Want people to think you are smart? Then, don’t smile and don’t say anything positive – especially about the economy. Pessimism has become so pervasive that people will believe just about anything, as long as it is negative.

Over the July 4th weekend, after a jobs report that showed 83,000 new private sector jobs were created in June, the Drudge Report had not one but two headlines that compared the US economy of 2010 to that of 1932. In other …

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[8 Jul 2010 | 6 Comments | ]

No one likes a good story about pensions to get his heat pumping as much as I do, or if you are Rich Miller, it gets your blood boiling to have Illinois referred to as “Greece by the Lake Michigan” in the New York Times (after consultation with the decidedly non-Greek. and coincidentally primary candidate Dan Hynes, of all people). Miller wants to know who said that, which probably won’t fix the budget and pension problems in Illinois, so I thought we could go on a different tack.
I am a …

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[6 Jul 2010 | No Comment | ]

Illinois Gov. Pat Quinn has handed out raises topping 20 percent to his staff at a time when he’s promising $1.4 billion in spending cuts because of the fiscal crisis. An Associated Press analysis of documents shows Quinn has given 43 salary increases averaging 11.4 percent since he became governor.

More at the SJ-R

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[1 Jul 2010 | No Comment | ]

Later this week, President Obama will sign an overhaul of the financial industry, the biggest change required by law since the Great Depression. For all the legal change it brings, it won’t prevent the next crisis but also won’t do much harm.

This bill will force existing firms to restructure their operations in order to comply, which may hit profits. For example, the new law will limit banks’ proprietary trading, and investment in private equity or hedge funds.
But this does not stop the process of financial innovation or …

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[17 Jun 2010 | No Comment | ]

Bloomberg reports
The cost of insuring Illinois bonds against default rose to a record as lawmakers sought to close a $13 billion deficit in the state’s proposed budget for the year starting July 1st, 2010
The cost of a five-year credit-default swap for the state rose 2 basis points today to 304.64 basis points, or $304,640 per $10 million of debt, as of 11:50 a.m. in New York, according to CMA DataVision. A basis point is 0.01 percentage point.
While Medill reports that the Illinois Teacher Retirement System
(TRS) is largely on the risky …