Sell Everything!

Geithner has just unveiled his stimulus plan. It is a $1.5 trillion stimulus. Oh, really? The first part of stimulus is for the Fed to resurrect some as yet unnamed (by the AP) but unused plan. Excuse me, but if it was unused up to now, how good could it be? How stupid does Geithner think we are? And this is supposed to be a "new" plan? Unbelievable! I'm starting to think I could do better. In fact anyone with some common sense could do better. Well, I guess if the Fed's resurrecting some dustbin solution, then Bernanke's in on this as well. The AP story on Yahoo! has already changed, so I won't give a link here. However, the earlier version - never mind. It's been taken down, so it's probably not true anyway. Here's what I'm getting from the Federal Reserve Press Office. The plan is to resurrect the TALF, and lend to holders of AAA securities backed by "newly and recently originated auto loans, credit card loans, student loans, and SBA-guaranteed small business loans." This will be funded by the Treasury with part of the TARP 2 funds. I'm jumping to conclusions from the Fox article, but it appears to me that this fund will increase TALF from $20 to a measly $100 billion. However, it's expected to have a multiplier effect on the economy of $1 trillion. Hogwash! The problem is lack of demand for loans! Consumer credit is contracting. The savings rate is increasing. Companies are laying off employees. If they're laying off people, I guarantee you, they're not borrowing money to expand.

This part of the plan is a total ZERO.

The second part of his plan is to use the remaining TARP funds to convince investors to buy bad assets from banks.

“We are exploring a range of different structures for this program, and will seek input from market participants and the public as we design it,” Geithner said in prepared remarks for a speech today in Washington.
“We believe this program should ultimately provide up to $1 trillion in
financing capacity, but we plan to start it on a scale of $500 billion, and
expand it based on what works.” (Bloomberg)

This is not a plan because in a case like this, the plan IS the details. So, we have two possibilities here: either Geithner is a fool, or Obama is lying about "transparency." Where's the transparency when the detail aren't revealed?

FOXnews calls this "TARP 2":

Within TARP 2, as it is called, the Treasury plans to purchase between $250 billion and $500 billion in toxic bank assets under a "legacy asset program," which Treasury officials told House members could grow to $1 trillion, a House source said. The program would be launched in partnership with the Fed and the Federal Deposit Insurance Corp., the source said, "to leverage the capacity of the public sector."

This part may be slightly better than the first part of the plan. However, the only way for the Treasury to encourage private investors would be for them to guarantee large profits for the investors. Maybe that's the point.

Did I say sell everything? The market seems to agree. It's down 300 points, since I started this post. This plan has been so hyped and so meaningless I will not be surprised to see it fall much further.

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And this news is just too bad to pass up: Wholesale inventories plunge by most in 16 years. Inventories plunged 1.6% in December. Here's the meat of the article:

Despite the sharp cut in inventories, sales are falling even faster, which means it is taking longer for distributors to sell their goods.

The inventories-to-sales ratio rose to 1.27 in December, up from 1.24 in the previous month. The ratio measures how many months it would take to
clear inventories at the current sales pace. The ratio is at its highest level
since March 2002.

Yup, we are clearly in a deflationary spiral, and we have an incompetent government that doesn't even understand what's going on.