Saturday, April 5, 2008

Recession Rocks the Republicans

The pained expression on the face of Federal Reserve Chairman Ben Bernanke when he addressed a Congressional Committee last week spoke volumes about the state of the US economy. The hopeful but cautious forecasts that marked his previous announcements since the collapse of the mortgage markets could no longer be viable as possibly true. When he said that "A recession is possible in the first half of 2008", it was the best phrase he could muster on the subject. He knew, America is already in it.

Lay-offs, the final factor of a deep recession was not on the radar screen of economic statistics since it is normally a lagging indicator; and as long as there are no reports of jobs being slashed, there was hope for a measure of growth. But the Labor Department's release last Friday of 3 consecutive months of job layoffs since January doused all hopes. A total of 232,000 jobs were shed in the first quarter (March - 80,000; February - 76,000; January - 76,000) across several sectors. The unemployment rate, covered by a separate household survey rose to 5.1%, with 434,000 Americans reporting that they were unemployed.

America's longest war (Vietnam) and costliest war (WW II) have been exceeded by the War on Terror. Iraq and Afghanistan has cost the US half a trillion dollars of borrowed money, when 2001 estimates were only at $50 billion. The budget deficit could run up to $350 billion this year including the stimulus package of $160 billion of which only 20% will return to the government by way of taxes. Yet this return will still not pay for the borrowed amount plus interest of the savings lent by other nations. America will have to create more wealth to pay for the war, the deficits, and the stimulus package; but with jobs being slashed and the non-reversal of big business strategy of outsourcing jobs abroad for higher profits - there is little it can do to increase GDP from its present 18%. It may even shrink further. Eighty two percent of what America consumes is imported.

Cuts in interest rates by the Federal Reserve spur the economy, but it is a contributing factor to a weak dollar. Sustaining the wars will drain resources and increase borrowings, further weakening the dollar. Collapse of the mortgage markets have generated losses to financial institutions whose default or deferment of loan payments to foreign banks add to the weakening of the dollar. Unemployment and job loss will generate delinquencies in payments for credit cards, auto loans, educational loans, among others, which are securities held by banks that back up their portfolios. These will also weaken the dollar. A weak dollar will raise the prices of gas, oil, energy, commodities and the 82% of items that America imports. Should Asian and Middle Eastern countries opt to dump the dollar in exchange for the Euro, the American Economy may collapse.

The recent CBS News and New York Times survey point to an increasing disenchantment of Americans with the way the country is being run. The Republicans cannot escape accountability for this one. That Bill Clinton's term should have stopped Osama bin Laden from bringing in 9/11 is a childish argument. They had the means to stop it but they failed. They had the support after, to manage the assault, but they bungled it. They raised fears so that Americans would give up some of their civil liberties, which they abused. They lied about many aspects of the war from the most critical to the most trivial. Now, Americans may be stunned in disbelief, but hopefully not indecision.

If they had a fool for a President, they can at least prove to the world that American citizens are not insane. Unless of course they choose a leader who will pursue a crazy war.



Anonymous said...

Pretty straight up on this one I think Durano. The good news I think is that most long term forecasts are a little more hopeful. Bottom line, once we put this war behind us and change the focus some, we'll start to pull out of this tailspin. Unfortunately this is still a very divided nation and extremism exists on both sides of the red and blue argument.


Anonymous said...

Can't say I'm surprised... and can't say I feel sorry for Republicans. I mean, when you fight all over the world and screw up the economy, that's what you get.

Hoping for a Democrat next time... although he/she will have a hard time putting the country back together.

Sorry, just venting ;-)

Anonymous said...

Perhaps now that recession has filtered to the Republicans it will be taken seriously.

durano lawayan a.k.a. brad spit said...

Hi Tommy,

That's the thing, putting the war behind, but when and how?

The extremism on both sides have the loudest voices and could drown out those in between who are focused on survival individually. It is when they start thinking as Americans collectively, not as individuals, could they be counted and heard and adhered to.

The worst is yet to come but I certainly hope this could be immediately addressed by a decisive and determined people as Americans have often proved they are. :-) --Durano, done!

durano lawayan a.k.a. brad spit said...
This comment has been removed by the author.
durano lawayan a.k.a. brad spit said...

Hi Zhu,

The next US President will have a very tough time taking charge of a very volatile situation internationally and domestically.

Americans should start thinking as a nation under a multi-racial and multi cultural blend, not according to party affiliation, political orientation, race, nor religion.

The problem may be with one party or the other, but the solution must involve all sides since they are all in the same boat. If they can't get this act together, we may be seeing the collapse of another empire in modern history. :-)--Durano, done!

durano lawayan a.k.a. brad spit said...

Hi Zork,


They can either take it seriously or blame it on others, or continue to stonewall and deny. But the more they do these, the more they will lose the trust of the electorate.

I Think the average American would feel the pinch soon enough and I would grant them that much discernment to realize what brought it about.

With the information available, such things would be difficult to cover up.

Throughout history, we learn that the more stretched an empire is, the farther its military goes; the weaker it is to defend its borders and the costlier it becomes to sustain. Taxing those within its control leads to mini- revolts, and its coffers can no longer sustain the expensive wars nor the extravagance of its elite and partners in the ruling class. A kingdom that is ruled by extreme conservatism stymies change and results in revolution.

France had a bloody revolution, England did not. The difference is that France was more absolutist, while England had a gradual shift with the transfer of power from the state to the people.

Perhaps the neo-conservatives should loosen their stranglehold on policy making in Washington. :-)--Durano, done!

The Fitness Diva said...

"Americans should start thinking as a nation under a multi-racial and multi cultural blend, not according to party affiliation, political orientation, race, nor religion."

Hello! That would be a great thing if we ever get to see in our lifetime. Wishful thinking, though. That has not been man's way since the beginning of time.

The pic of the tiny dollar speaks volumes about our present economic state.
Good one!

durano lawayan a.k.a. brad spit said...

Hi Fitness Diva,

The problem that plagues America is that it is so divisive to the extent that sub-groups believe extremism is the only means by which action can take place that favors their respective positions. And this goes to both ends of the political spectrum. It's a "nice guys finish last" attitude with a "get everything I want sorry for the losers who get the crumbs" thought process.

Canada is a multi-racial, multi-cultural country. It has blended well and their attitudes are warm towards new ethnicities where they know they can learn from and be enriched. They welcome new immigrants not as Asians nor Africans, nor Europeans; but refer to them as Canadians. It's acceptance of human beings and tolerance of their culture and religion.

The thing with America is it's preoccupation with being the best and being number one in a wrong way. You're not the best by mere proclamation nor by putting other people down. You create an illusion by saying you're the greatest while suppressing others to excel, because you have not grown any better but simply prevented others from doing so. It's the "winning is everything" way of thinking that makes Americans lose sight of what is right. Individualism and personalism often take center stage, rather than what is best for America as a nation. :-)--Durano, done!