Campaigns Concentrate on Collapse Concerns

The messy meltdown at the New York Stock Exchange that rocked bourses in Europe and Asia, has not only made the economic situation the most critical issue in the campaign; but has also unmasked how the Republicans wrecked the economy. The chilling impact of the collapse of Lehman Brothers also removed much of the glitter in the skin deep appeal of Sarah Palin, as Americans have been awakened from a spell by the reality of very hard times in the immediate future. The generally accepted perception that the US is taking the wrong route has been reinforced, and John McCain will have greater difficulty extricating from the failures of this administration.

McCain sunk deeper earlier when he echoed the White House line that the economy was fundamentally sound, and praised the government for not wasting taxpayer's money on another bailout; but reversed himself later in the day saying the economy was in crisis. Perhaps he was fundamentally sound asleep in the earlier statement, but it reflected how fundamentally out of touch he was. He passed the task to Palin to blame Washington and Wall Street's liability for the financial carnage, with undertones of retribution for those responsible. However, Palin's empty bravado was gigantic in words but lilliputian in substance.

Senator Barack Obama described the Lehman debacle's impact on consumers contrasted against the profits to the top management of such companies which sacrificed the middle class Americans. However, he did not endorse any solution or new policy, nor oppose the actions of the US Treasury and the Federal Reserve. Either he failed to seize the momentum or he may be ill-equipped to understand how to untangle such a financial mess. While polls show that Democrats are more trusted with the economy, Obama has to present a concrete and substantive vision that will take America out of this predicament, to establish his advantage. As things stand, the American public remains disadvantaged as always, while Obama plays safe.

On Tuesday, the Federal Reserve announced the bailout of AIG fully supported by the US Treasury, who said it was done to protect taxpayers. This appears to be the reason for McCain's reversal - foreknowledge of the AIG bailout to support the Administration's decision, and to make him appear like he knows the means by which to restore stability in the economy. But this reverses the Republican position of less government and allowing free market forces to take its course. The administration spin on the bailout purports to alleviate the burden to taxpayers by saving the economy, without clearly stating why or how. The argument that AIG's collapse would have more disastrous consequences because of its varied investment activities globally than Lehman's may have some validity, but why the situation reached this point has not been answered nor has anyone been charged for anything. Who will Sarah Palin prosecute in Washington for this tragedy? Her tragedy is that she barked and growled for nothing. Like a mad pitt bull.....with lipstick.

The shift from individual buyers losing their homes and crushing their dreams to the biggest institutions like Freddie Mac, Fannie Mae, and now AIG (being taken over 80% and given $85 billion over a 2 year period) elevates the problem to a worldwide concern. They can now be forgotten because the focus is on a larger scale - plus they should be thankful they are still being saved - from heavier taxes should these monoliths be allowed to crash. It would be so unpatriotic to complain when they are being rescued from potentially bigger tax burdens. But these bailouts will cost them nonetheless, as it will increase the national debt which will be paid through taxes, together with inflation and dollar decline that will further erode their purchasing power.

Analysts in Washington and on Wall Street contend that the economy will recover strongly by next year which would reduce substantially the country's budget deficit. These are statements meant to restore confidence in the financial markets. It comes with the hope that these announcements, attributable to their equally worthless reputations, would be forgotten should it remain unchanged or gets worse. More realistic assessments indicate that the crisis will continue well into 3 years since no one can predict how deep the effects on the economy are, as well as how much the cost of the bailouts will actually be.

With all the global problems facing the next President, why anyone would seek the office and bludgeon himself further with this winless economic mess for several years defies comprehension. It would be idealistically immature to think that the winner will work as nobly as he would profess considering the nature of politicians and their ilk. But the need for a leader to inspire, protect, and restore America remains, and it falls on the shoulders of two men; one of whom is being positioned as a lameduck on his first term. Is it power and prestige? Or, our turn to be filthy rich and obnoxiously wealthy? These two go together well and are logically founded reasons.

Could it be messianic complex? Or pure altruism? Would it not be insanely unrealistic to seek the position solely for these reasons? If whoever wins does half of what he promised, or accomplishes a fourth of what is required, then the voters would have been only half as crazy or a quarter foolhardy electing him. Idealism is not dead, it is only gasping for breath.

Haaaarrrrwwwwwk...Twooooooph...Ting!

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.

Haaaarrrwwwwk...Twooooooph...Ting!