On the economy, this is from an analysis Chris Payne did for the Guardian (via Information Clearing House):
First, the specifics of Tuesday's statement on policy. As well as keeping policy interest rates at almost zero (0.25% to be exact), the Federal Reserve announced that it would be using income it gets from the mortgage securities that it bought off the banks to buy US government treasury bonds. Rather than getting cash in to cancel the debt owed to it (on the mortgage bonds it holds), the Fed will be using this money to buy other debt: government debt.
But what happens when one arm of the government (the Fed) buys the debt of another arm of the government (the Treasury)? Answer: the government deficit is financed by "printing money". For, in this regard, the Fed is not financed by taxpayers but is able to pay for the purchases of these bonds by crediting, with money, the accounts of those who are selling their treasuries to the Fed. The button on the computer goes "bing" and – hey presto – there is new money.
So as long as there are US treasury bonds for the Fed to buy, then there are mechanisms for stopping the money supply from falling, even while consumers rush to pay back their debts and cancel out their credit positions in the banking system.
This is all well and good: but let us be clear about one thing, this is not a real "stimulus". It would only be a stimulus if, by doing this, the Fed was creating funds that were being invested in productive assets. Instead, these measures represent ongoing desperate attempts to keep the money supply from collapsing, in the hope that, at some point in the future, businesses (and consumers) will start to borrow and spend again. In times like these, when uncertainty is rife, when people are saving, not borrowing, low interest rates are, as Keynes said, nothing more that pushing on a string.
In other words, they don't compel entrepreneurs to invest. Instead, Keynes argued that money should be created by government and spent on investment projects: a sort of combination of monetary mechanisms with fiscal policy.
The two companies have long been the biggest players in the mortgage market, making them natural scapegoats when the market soured — especially among Republicans already suspicious of government involvement in financial affairs. Never mind that publisher Guy Cecala of Inside Mortgage Finance says Fannie and Freddie were not the biggest offenders in backing risky, subprime loans.
"Clearly there was a lot more going on than just Fannie Mae and Freddie Mac purchasing a few bad loans," he says. "In fact, the bulk of the bad loans weren't purchased by Fannie Mae and Freddie Mac.
"Yet, Fannie and Freddie carry the government guarantee; they're supposed to do good things for the housing market. And to some extent, everybody feels they let us down."
Fannie and Freddie were established decades ago to encourage homeownership by making loans more widely available. They provide money to lenders by buying up mortgages, keeping some and bundling others for sale to investors. Although both were private, for-profit companies, it was generally understood the government would back up Fannie and Freddie if they got into trouble. That's just what happened two years ago when the government took over the companies, leaving taxpayers with a very big bill.
What really is left?
There's nothing in the existing handbook that Barack can use to help the economy. So the key now is to create jobs. Something he's proven a disaster at, granted. But it needs to be manufacturing of some sort, of some sort of a good that is sold not just in the US. It needs to be a world product. That's really all that can help the economy at this point. And it is possible. But it would require some real leadership and it would require some real money.
I don't see Barack having the guts to do what's needed for the economy.
This is C.I.'s "Iraq snapshot" for Tuesday: