Inflation is up, oil is down, and financial stocks surge.

Inflation is up, oil is down, and financial stocks surge.

Inflation is up, oil is down, and financial stocks surge.

A summary of what's in the major U.S. newspapers.
July 17 2008 6:21 AM

Ups and Downs

The Washington Postand New York Timescontinue to lead with economic news, which was all over the map yesterday. New figures released yesterday showed that consumer prices increased 1.1 percent last month, the second-biggest monthly increase since 1982. In total, consumer prices last month were 5 percent higher than a year earlier. The NYT goes high with the oil market that has pushed down the price of crude oil by more than $10.50 a barrel in the past two days. The Los Angeles Timesleads locally and devotes its top nonlocal spot to a look at how rising oil prices are boosting authoritarian governments in several petroleum-rich countries. Three countries in particular—Iran, Venezuela, and Russia—are using their new wealth to challenge the United States and demand a seat at the table to discuss world affairs.

The Wall Street Journal leads its world-wide newsbox with Israel's release of five Lebanese militants in exchange for Hezbollah returning the bodies of two Israeli soldiers who were captured in 2006. USA Today leads with a look at how several state and local governments are working to limit a practice known as "double dipping" that involves government workers who collect a pension and a salary at the same time. The practice is perfectly legal in most states and permits the rehiring of retired workers, often at the same job. Supporters of the practice say it allows governments to hold on to experienced employees.

Advertisement

The WP also highlights in its lead story that, despite the grim inflationary news, the stock markets rallied yesterday as the Dow Jones industrial average increased by 2.5 percent. Who led the increase? Why, financial shares, of course. Yes, these are the shares that had been practically enduring a fire sale in the past few days, but yesterday they "roared back in their biggest one-day rally ever," notes the NYT inside. "[T]he surge left many traders dizzy." Even Fannie Mae and Freddie Mac shares rose about 30 percent. Investors regained confidence not just because of the declining oil prices and some relatively positive news from Wells Fargo, but also due to the Securities and Exchange Commission vowing to crack down on rumors and short sales of the biggest financial firms.

Meanwhile, the inflationary news highlighted how prices are increasing during a weak economy. And, as the WP emphasizes, the figures show how the rise in prices is moving beyond energy and food to affect other sectors of the economy. "There's not enough lipstick to put on this pig," an economist tells the NYT. "[T]he bottom line is that U.S. workers are falling farther and farther behind." As has been mentioned many times before, this combination of rising prices and sluggish growth puts the Federal Reserve in quite a bind because its traditional weapon to fight against inflation risks slowing the economy and vice versa.

The WP fronts a separate look at how the expanding role of the Fed during the ongoing economic crisis has led to questions of whether the central bank has gone too far. Some say the Fed is taking on too much responsibility and might take its eye off its main responsibility of managing monetary policy.

Some were optimistic that the decrease in crude oil prices meant that a peak has been reached. But others insist it's a temporary blip and predict it will reach $200 a barrel soon enough. The LAT notes there are several potential pitfalls to the recent wealth of several oil-rich countries, but the governments are happy to use the money to promote their causes in the meantime. "This is perhaps the largest shift of wealth and resources in the history of the world economy," an economic analyst tells the LAT. In its business section, the WP says that since richer countries have been widely affected by the "global slowdown" while most emerging economies haven't suffered as much, it "marks a global economic role reversal of sorts." 

Advertisement

Winning the release of the two soldiers captured by Hezbollah was one of the main reasons why Israel launched the 34-day war that killed more than 160 Israelis and almost 1,200 Lebanese. The reactions to yesterday's exchange couldn't have been more different. Israel was in mourning, while the released prisoners were welcomed as heroes in Lebanon and the government declared a national day of celebration. It marked a clear victory for Hezbollah as it had kidnapped the soldiers with the explicit intention of using them to bargain for the release Lebanese prisoners.

The WP goes inside with word that the White House got angry with former Attorney General John Ashcroft when, in search of someone to lead the Justice Department Office of Legal Counsel, he sent over a list of five candidates that the administration didn't like. Although all the lawyers that Ashcroft suggested were Republican, the White House wanted a definite loyalist who would legally justify the continued use of harsh interrogation techniques. The administration wanted Ashcroft promote John "torture memos" Yoo, but Ashcroft refused. In the end, they chose a compromise that didn't work quite as planned because the lawyer they chose challenged the administration and its justifications for the coercive interrogation methods. The Post says this information is another example of how Ashcroft "is coming to be viewed as a voice of moderation on some of the most sensitive national security issues the nation faced after Sept. 11."

Everyone goes inside with the Bush administration's decision to send a senior U.S. official to international nuclear talks with Iran this weekend. The move is a shift from the long-standing White House position that there would be no direct talks until Iran stopped its uranium enrichment program. But it also comes at a time when there appear to be hints that the sanctions on Iran are having some sort of effect and Tehran is more willing than ever to negotiate. Still, the move does risk alienating the more hawkish wing of the Republican Party, whose members are already angry at the administration for what they see as its willingness to hand concessions to North Korea without much in return.

The WP's Harold Meyerson notes that although Republicans like to talk about taking the government out of the economy, the current crisis shows that sometimes the government needs to get involved to prevent widespread market failure. This is making things difficult for Sen. John McCain. "[A]s McCain tries to balance the tattered libertarianism of Reaganomics with the financial exigencies of the moment, he and his campaign have moved beyond inconsistency into utter incoherence."

While officials in Washington rushed to reassure Americans about the state of the economy, what was Bush doing? Why, watching a game of T-ball at the White House, of course. The WP's Dana Milbank points out it marked the 19th T-ball game of Bush's presidency and that it was followed by a dinner honoring Major League Baseball, the third since he took office.

Daniel Politi has been contributing to Slate since 2004 and wrote the Today’s Papers column from 2006 to 2009. Follow him on Twitter.