Election As Mirror

Obama’s now got Colin Powell’s endorsement. Chairman of the Joint Chiefs of Staff under George the first and Sec’y of State under George II. That’s an endorsement from a military man, not a black man, but I’m sure the right wing radio types are already licking their chops. Vile (but entertaining) bastards.

He’s already got Buffet and Volcker, Rubin and Reich. That’s most of the economy, stupid.

The mark of a society that survives is its ability to discern, and willingness to listen to, the best and brightest within its ranks.

This election, is, more than anything else, a referendum on us. On whether our society survives and prospers, or continues the wretched decline that began on January 20, 2001.

America’s going to look in the mirror on November 5th, and see whether we’re a frightened people clinging to a limited view of the past, or a courageous bunch willing to take on the unknown.

Romans watching Rome burn, or the Founding Fathers. You decide.

FEAR Is the Republican’s Best Friend

The current economic crisis is, counter-intuitively, playing into Republicans hands. Whereas the conventional wisdom is economic problems=advantage democrats, and is the traditional counterpoint to national security=advantage republicans, the deeper, operative, and as yet currently unrecognized connection is fear=advantage republicans, and the economy is provoking real and substantial fear among all classes.

I received panic calls on Sunday from a friend who could be described as blue collar, as well as one from a Wall Street heavy who thought he was going to lose half his net worth when the market opened on Monday.

Obama, Biden, and Democratic House and Senate incumbents, as well as Democratic challengers who until recently were the front-runners in their local elections, have to hammer home the overwhelming Republican responsibility for the greed that caused the current turmoil. Neither party can claim zero culpability, but for reasons both factually correct and pragmatic Democratic candidates at all levels have to strongly admonish the swing voters to remember the prosperity enjoyed by the nation during the Clinton years.

Bill, Hillary, Reich, Rubin, and Volcker (the Fed chief under Reagan and an early Obama endorser) have to come out of the closet ASAP with firm and reassuring strength and an easy to comprehend message as to how we’re going to climb out of this mess.

Otherwise, fear and the Republicans win.

Econo-Quickie: Deep Denial and Its Solution

In rough, round numbers, the U.S. consumes around 20 million barrels of oil/day. Just released data indicates that crude oil inventories increased by 3 million gallons. A bit more than a sixth of a day’s worth. And the equity markets, desperately looking for a positive data point, grab this one and run with it.

We’re going to get what we deserve. An economy that looks a lot like the rest of the scorched earth that Dubya will leave behind. The Emperor will eventually be seen to have no clothes.

If Obama’s elected, he’d be wise to trot out his supporter Paul Volcker to explain to the nation that there’s some pain to be gone through while the excesses are wrung from the system. Volcker can refer to his success in the ’80s in which he, as Chairman of the Federal Reserve, inflicted relatively short term pain on the nation (around 5 years worth) in order to have it followed by long term (20 years) prosperity.

This may well make Obama the best one term president in American history.

Full disclosure: I have nothing to disclose at the moment (although that could change at any time), as I’ve found it less painful to step aside when I have no clue, than to freeze like a deer in the oncoming headlights.

Wreckonomics; 5/27/08

The number of miles driven by Americans has dropped off precipitously in recent months. The repercussions will be dramatic. With toll revenues down, state deficits will be up, and funding for public schools and other social services will be reduced from their already tenuously low levels. Ironically, fast food sales, which initially were projected to rise due to strained family budgets, may also decrease, as you can’t patronize a drive-through if you’re not driving.

The Fed is out of ammo, having cut interest rates to dangerously low levels. The Fed also contributed to the rise in gas prices as producers don’t want inflation eating into their profit margins. The purchasing power of the monies collected by the federal government through their own gas tax will also be down, as both fewer dollars are collected, and the dollars that have been collected are each worth substantially less than they were a year ago.

This is but a small portion of the results of a failed economic policy, in which a free market economy was replaced by a neglected market economy. The type of painful but necessary recession that Paul Volcker induced in the early ’80’s may be the only thing to pull us out of this tailspin.

What I do about the above isn’t necessarily right for anyone else. That said, lately I’ve been investing my crumbs in the Brazilian economy and reading about Panamanian real estate.

Economics 101

There’s a troublesome news article in the Wall Street Journal this morning on interest rate decisions overseas.

What’s worrisome is that, although the US, the UK, and Europe are all facing similar problems (housing meltdowns, sub-prime issues, higher energy and food costs, etc.) we choose the quick (but possibly short-sighted) fix (a rapid lowering of interest rates) while they maintain a bit of tough love (holding rates steady). Paul Volcker

Our politicians are no better than our central bank, as Clinton and McCain want to violate one of the few solid laws of economics by making an under-supplied commodity (gasoline) cheaper by suspending the federal gas tax, thereby increasing demand and further reducing supply, which will then inevitably drive prices even higher down the road, so to speak.

Obama, who is being advised by, among others, Paul Volcker (the man who took on double digit inflation and taught it to heel in the early ’80′s), may not have the experience of running a massive economy, but he has the intellectual humility to know what he doesn’t know, and that allows him to call on the best minds out there (Volcker, Reich, et al.) to assist him in correcting 8 years of economic negligence.