Another old post that never made it to the board

This is another old article that I didn't want to just trash. I wrote this during that period when my Internet connection went bye-bye, and I fully intended to post it whenever I was able to get back on-line. But this article dealt with the economy, and the situation was developing rapidly then; in point of fact, the bottom was then falling out but hadn't fallen so far that we couldn't see it. Now, looking for bottom feels like gazing into a bottomless pit.

I tried, for a day or so, to keep this article updated, but after having to post three updates in two hours I decided that it was a bad job and gave it up. But while going through old articles I realized I still had it, and still liked it, dated though it was, so here it is for your historical reading pleasure.

Remember, this is old stuff; the election was still in the future and the economy, while sick, wasn't yet on the critical list. Two and a half months ago...seems like forever doesn't it?

BV 12/4/08

Are you listening, John McCain? It's me, the Economy...
Wednesday, September 17, 2008

Once again, this is me writing off-line to post later. This article deals with the economic situation which is still developing, and I'll be updating it as necessary...updates will be dated, bold and italicized. (Also red. -BV 12/4) All times Eastern.

John McCain says he doesn't understand economics as well as he should. He's not alone there; economics is such a complex subject that I suspect it takes a degree in economics to understand economics. I don't think Obama understands economics either; isn't that what economic advisors are for? At least Obama's advisors seem to understand it well enough to see the problems.

Be that as it may, I don't think it takes a degree in economics to say that, economically, we are in deep shit. In the last few days, several important things have happened that aren't exactly inspiring confidence on Wall Street:

Merrel-Lynch, one of America's oldest and largest investment firms, was sold to Bank of America.

AIG, America's largest insurance company, was saved from bankruptcy by a Federal loan (read bailout), secured by collateral consisting of many of the insurance, financial and investment firms that AIG owns. The Federal government now owns most of the debt (good and bad) that AIG has acquired/accrued over the years.

"Fanny May" and "Freddy Mac," which loaned most of the money that people are now defaulting on in record numbers, and as such were facing insolvency if not outright bankruptcy, were bailed out by the Federal government.

Lehman Brothers, America's leading investment bank, went belly-up and is no more.

American business and finance (most of it, anyway) is suffering from an odd kind of dual personality. When times are good, they're all the perfect capitalists, staunchly opposing any effort to socialize any aspect of society that touches their interests and fighting any effort to tax them for services that they say they don't need. On the other hand, when they suffer serious financial losses they all hoist a red flag and turn into raving socialists; they run to the Federal government for a taxpayer-funded bailout, they want protection from their debts and their creditors, and through all of this they want to continue doing business as usual.

Morgan-Stanley and Goldman-Sacks are almost the only major investment banks left in a market that is being driven primarily by fear. Major banks are, right now, afraid to lend to each other let alone to anyone else, so the Federal Reserve (and other government-run institutions around the world) are forced to keep pumping money into the system just top keep banks in funds and able to lend money...which they're being very careful about lending. Yeah, now....

UPDATE Thursday 9/18 9:30 AM - As of Thursday morning, there is word that Wachovia is up for sale and speculation that Morgan-Stanley and Goldman-Sachs may merge, either with each other or with new partners such as Wachovia. Other mergers are rumored. -BV

It's interesting to see how all this effects the Presidential race. The weak economy favors Obama, what with McCain continually saying that the economy is strong and everyone else seeing something vastly different. How could this not help Obama? At least it's driven Sarah Palin out of the headlines for now...she can join Joe Biden on the bench.

Disturbingly enough, Bush hasn't been talking. It's traditional for the President to at least make some kind of speech at times like this, and in a timely fashion...but so far, silence from the White House. (But there are indications that he might speak up soon and quotes indicating that the President's schedule is in flux, as of Midnight Wednesday night-Thursday morning). With Bush not talking, investors are getting even more nervous; Americans like to believe that their government is doing something--anything--at a time like this. Bush needs to step up to the plate, and if not actually do something then at least tell us what he's going to do.

UPDATE Thursday 9/18 10:18 AM - George Bush has spoken at last; he just gave a brief speech (about three minutes, if that) that didn't do much to inspire confidence in the American economy. George is focused on placing Band-Aids on bleeding wounds, and hasn't offered anything to stop the cuts in the first place. -BV

And John McCain, that staunch opponent of government bailouts and regulation, has been forced to reverse himself (again) and support taxpayer funded bailouts (though they're calling them "loans") of Fanny and Freddy and to call for closer government supervision of them both.

But don't worry...John McCain has said that the economy is fundamentally strong. Yeah, right.

He really doesn't understand this stuff, does he?

The Blues Viking

UPDATE Thursday 9/18 10:00 AM - I just heard that the Russian stock market fell 11% yesterday in a panic fueled by concerns over the U.S. stock market. This is me, eating my previous words...it appears we actually can hurt Russia, after all...by going broke. That'll show 'em. -BV

The opinions here expressed are mine and if you don’t like them you can get your own damn blog.