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Friday, November 28, 2008

Screw Middle America

SEARCH BLOG: POLITICS

Now that the 2008 elections are over, I have had a chance to evaluate some of the political dynamics that were in play.

Democrats:

  • Effectively used slogans to generate enthusiasm for old programs and policies
  • Convinced uncritical voters that things would be changed the way they personally wanted even if what was said had no relationship to what they wanted
  • Helped create economic problems and then claimed only they could solve the problems by being allowed to take charge
  • Opposed U.S. military actions, but claimed that it was their prodding that enabled the U.S. to be in a position to leave the Middle East in a stable situation
Republicans:
  • Could not express a clear view of their plans for the future; McCain tried to out-Democrat the Democrats
  • Tried to satisfy disparate religious and business factions that had no real common base
  • Ignored the problems of the U.S. industrial and consumer sectors in favor of the financial sector
  • Failed to communicate well how specific foreign policy and military spending in the Middle East was beneficial to Americans allowing the Democratic Party to point to money spent in Iraq when the U.S. economy was faltering
The Democratic Party was able to portray George Bush as incompetent and out of touch because he simply could not communicate a convincing message about America despite military success in Iraq and Afghanistan.
When the economy began to deteriorate, the Republicans tried to ignore the situation and convince the public that there was no problem and that the Republicans policies were responsible for great prosperity... a fatal strategic error that had turned the first George Bush out of office and would do the same to his son's party.
I did and still do hold the position that Nancy, Harry, and Barack are equivalent to sideshow carnival hacks... like the carnival barkers of old they are able to draw a crowd and get them to pay their money. The problem is that the Republican leadership is long on market and military principle and short on pragmatism.

The Republican leaders claim to believe in free trade and open markets, but conveniently ignored the currency manipulations and treaty violations of the Asian governments as long as cheap goods and stock prices were riding high. When the financial sector abuses began to emerge as bad loans and a potential for investment firms to fail, the Republicans first tried to ignore the problem and then came up with a call for an emergency $700 billion for unspecified use by the financial sector.

As the Bush administration winds down, the Republicans have continued to show a general insensitivity to the plight of the consumers and even more so the industrial sector... especially the automotive manufacturers which represents one of the few major heavy industries remaining based in the U.S. Meanwhile the Democratic Party is seizing the opportunities to expand the involvement of the federal government in the industrial sector by tying any loans to equity positions and a say in the way the businesses are run...
something that private credit institutions do not do... and something not required of the financial institutions that are scheduled for 60 times the amount of money that the automotive companies are asking for... $700 billion plus an additional $800 billion... $1.5 trillion versus $25 billion!
And the no-strings-attached money hasn't begun to get the credit markets back in shape.

The Republicans give the party line that they are being fiscally responsible and free-marketers when it comes to the automotive manufacturers, but conveniently ignore that for the financial sector. The Democratic Party has reluctantly supported the notion of a $25 billion loan for the automotive manufacturers... as long as they get to call the shots for future vehicle plans... and because the unions would blow a metaphorical head gasket if the Democrats don't come through with money to save jobs.

So, from where I sit, the Republicans have taken care of their buddies in the financial firms while being content to work out high-profit deals with foreign companies and governments. Meanwhile, the Democrats have been focused on their broken social and dubious environmental engineering programs and will use them against businesses and individuals who don't toe the line.

I don't see either party standing up for middle America... the businesses and individuals who are responsible, bill-paying, tax-paying, ethical, and law-abiding... the strength of America.
Nevertheless, I'm willing to listen to arguments to dissuade me of that notion.
Step right up to the microphone.

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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
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The Independent (UK)

Tracking Interest Rates

Tracking Interest Rates

FEDERAL RESERVE & HOUSING

SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006 Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
November 28, 2007 FED VICE CHAIRMAN DONALD KOHN
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."
http://www.reuters.com/

December 11, 2007 Somehow the Fed misses the obvious.
fed_rate_moves_425_small.gif
[Image from: CNNMoney.com]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's Economy.com. "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.”
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)