Crisis Can Bring Concensus

You need to be prepared to adjust to a failed Euro!

Europe is in a mess and the world is so intertwined that we cannot avoid it impacting our economy. The euro seems doomed to fail because it is dependent on Germany giving back much of the gains received from the Euro Zone experiment. This is not likely unless Germany concludes they will lose even more by letting Europe continue its downward spiral. They were able to significantly boost imports, which in turn helped them reunify their nation after East Germany’s collapse. If, when the euro zone fails, the consequences may be as bad as our 2008 meltdown.

It is hard to envision Europe becoming a united nation. The United States consolidated a major portion of North America by obliterating the nations that previously occupied the land – the Native American Indian. This will not happen in Europe.

The process of integration was spearheaded by a small group of far sighted statesmen who practiced what Karl Popper called piecemeal social engineering. They recognized that perfection is unattainable; so they set limited objectives and firm timelines and then mobilized the political will for a small step forward, knowing full well that when they achieved it, its inadequacy would become apparent and require a further step. The process fed on its own success, very much like a financial bubble. That is how the Coal and Steel Community was gradually transformed into the European Union, step by step.

The process culminated with the Maastricht Treaty and the introduction of the euro. It was followed by a period of stagnation which, after the crash of 2008, turned into a process of disintegration. The first step was taken by Germany when, after the bankruptcy of Lehman Brothers, Angela Merkel declared that the virtual guarantee extended to other financial institutions should come from each country acting separately, not by Europe acting jointly. It took financial markets more than a year to realize the implication of that declaration, showing that they are not perfect.” George Soros, Remarks at the Festival of Economics, Trento Italy

Consensus sometimes comes out of a crisis. Let us hope it happens sooner than later.

Do Republican’s Believe in America’s Future?

When the consumer is scared he hoards cash. The same is true with business. When they are not sure about the future, they do not invest in new plant and equipment. They stay liquid until they are certain that any money invested will provide a reasonable return in the future. Otherwise, they hang on to cash waiting for a brighter day. It does not matter that interest rates and prices are low; there is fear that they may fall further or worse yet, a major economic calamity may occur. Some call this a liquidity trap.

Maybe this is the problem many republicans have with the government stepping up and investing in infrastructure, oil exploration, developing other sources of energy, investing in education, implementing high speed internet and other such projects that would increase our future productivity.

Maybe they are not sure we have a future.

Saving GM

I live in metro Detroit. At the time GM went to Wahington I was only for the bailout if there was a reasonable success plan in place. Romney is wrong. The industry would not have survived if GM went through the normal bankruptcy process. The suppliers in the industry would have been destroyed and so would have 100’s of thousands of jobs. Obama made the right decision and fortunately it had the right result. This does not always happen. My party has lost its way led by the Tea Party.

Capitalism is broken and needs fixing or must be further regulated t0 protect the consumer and worker from oligopolies. This is directly related to the inequality of income in this country. If we desire to fix inequality, we must fix capitalism. The United States was founded on the principle that everyone is born with the right to life, liberty and the pursuit of happiness. Early on our forefathers decided the best economic model to reach these pursuits was capitalism. Free markets was chosen to best attain the nations economic objectives. Capitalism is here to serve society. Society is not here to serve capitalism. Read More:

Choosing A President

The criteria for the best presidential candidate is one having experience, character, an understanding of the problems facing the country, is living family values and will not sacrifice what is best for the country to improve his chances of winning in 2016. Barack Obama is the only candidate meeting this criteria.

He made mistakes early including allowing health care to side-track focusing on the economy, not recognizing the need to build coalitions with the Republican leadership in the House and Senate and failing to capitalize on the work done by the Bowles-Simpson Committee; even though he recognizes the need for a balanced approach to solving our debt problem.

We are better off than we were four years ago. With hindsight we know we were deeply involved in a sub-prime mortgage meltdown that almost brought on a depression. This meltdown was partially brought on by relaxing financial regulations and allowing institutions to get to big to fail.

In November 2008 everything came to a head. Without quick action by the Federal Reserve, during Bush’s term, we indeed would have revisited the 1930’s. Much of the large spending icreases the Republicans complain about resulted from the errors made during the Bush years. Frpm 2000 to 2008 consumer debt increased by 163% as shown by the chart to the left from the Federal Reserve.

The truth is economic hangovers hurt and they take years to correct. The recession officially started in 2008; however, much of our growth in the last decade resulted from excess consumer debt and the housing bubble. We borrowed from our future and are now paying the price.

At the same time, we were involved in a war in Iraq that should never have been. Thanks to Obama we are now out of it. Some will say we left too early. I say we went in too fast. It cost us much in life and treasure, while getting very little in return. In addition, Osama bin Laden is dead and al-qaeda is in disarray.

The President recognizes the need to invest in our future through education and building and repairing infrastructure. The Republicans have blocked every attempt to do so by demanding other programs must be cut while not agreeing to any tax increases on the wealthy.

We have an economic system that is not fairly distributing income. Our “Free Markets” are broken and no one is fixing it. Free markets can be harmed by over regulation by governments. The same markets can be destroyed by over zealous companies controlling markets and destroying free enterprise. The result is economic power becomes concentrated as does income and wealth.

Will a candidate, Republican or Democrat, please step forward and address this issue?

Depressions Do Not Happen In A Day!

Obama is getting blamed for the high unemployment numbers and our current economic downturn when in fact we should be pointing our finger at the Bush administration. The country’s eyes were taken off the economy by the disaster of 911 and it was exasperated further with the unjust war in Iraq.

This is a Bush depression that has its roots in the early part of the last decade.

This depression did not happen in one day. It evolved over time. We presently have an unemployment rate of 8.5%, compared with a rate of 4.2% in October 2008.

Below is a graph showing unemployed from 2000 to the present. In 2007 roughly 8 million people were unemployed. Today the unemployed total 14 million. If we take into account that many of the jobs created from 2000 forward were related to the housing bubble caused by the sub prime mortgage scam, another 2 million jobs were artificially created.

Has Obama made mistakes? Of course he has and much of it was due to a lack of experience. One of his first mistakes was tackling the health insurance issue too early and not getting directly involved in the debate for almost a year. Another was he spent too much time trying to compromise when his opposition had no desire to compromise. This was especially evident with the deficit discussions and the need to raise the debt ceiling.