Diary

By Gosh The Chickens Are Coming...

But not the poultry forecast by the twirling Rev. Wright during a lively sermon sometime back. No these fast returning birds would, if Rev Wright were of the Church of Rome, have his nihil obstat and imprimatur.

It is 2011 and it is the cherished programs of The Left that are coming. Coming to simultaneous ruin. While Republicans fret about electability etc. the folks now occupying the White House must be way past mere fretting. Much like accountant Leo Bloom in “The Producers” they’re muttering, “No way out. No way out” as they reach for whatever serves as their ittle boo blankie.

As in 1992 it’s the economy stupid and this time they are the incumbents. And the stupid economy just won’t cooperate.

Unemployment and underemployment numbers are wretched. Growth? Don’t ask. Prospects for 2012? Not so hot.

Western Europe embraced an essentially socialist welfare-state policy following the disasters of two ruinous wars. This worked for awhile. Following WWII the US dollar was strong and various European currencies were weak so the US soaked up a lot of the continent’s manufactured goods. The Europeans also moved toward economic union and the initial moves toward free trade paid dividends.

But inevitably the expense of cradle to grave security caught up with our European friends. Volkswagen “bugs” cost about $1,800 until the mid-sixties when they began to get a lot pricier very quickly. Same story for virtually everything else. Then along came Japan, but that’s a different tale for another time.

Meanwhile the Europeans decided a common currency was just the thing. And the Euro came to be. This was, everyone admitted, tricky. No German money, nor French, nor Italian; just a common European currency to eliminate currency translations, special accounting and so on and so forth. Special rules were put in place to keep the various participants on the fiscal straight and narrow. Soon second and third-tier economies such as Greece joined the “Euro-Zone” Now the Greek GDP is about the same size as that of Dallas-Ft.Worth with no disrespect intended for the metroplex. But heck if you’re utopian minded why shouldn’t little Greece use the same money as one of the most technologically advanced industrial nations on earth. (Or “the planet” if you please)

It all worked or seemed to until it didn’t. The Euro went up versus the dollar. This made things denominated in dollars relatively cheaper in Euros. About those straight and narrow rules however. A problem. Germany followed them, but others did not and…nothing happened! So if you lived in Greece, for example, you had a profligate welfare-state with a strong currency. Sweet.

Meanwhile back in the good ole US of A our welfare state was hitting a few bumps too. We had standardized most mortgages (See “Liars Poker”) so that they were able to be bought and sold as a fungible commodity. You know like wheat or corn. Not so long ago local bankers who actually understood the local housing market and perhaps even knew the mortgage applicant made the decisions. Some people of course didn’t qualify. Down payments typically were about 20 per cent so the borrower had “skin in the game”

All of this changed when mortgages became a commodity and politicians decreed that home ownership was a right. Predictably this led to the so-called “housing bubble”. Commoditized mortgages led to a fill in the blanks correctly game rather than borrowing based on actual credit merit. Low or no down payments meant no skin in the game so speculation aka “flipping” Etc. etc. was easy. Heads I win. Tails you lose.

Oh, don’t forget the energy tax. That’s the price of nutty environmental rules and regs that make the US much more dependent on imported oil than need be. It’s a big price and we all pay it everyday.

I’m not an economist and this is a very cursory look at a huge set of problems. But my point is that behind most of these problems is government.

Ironic that we have now a president who most believes in government remedies trying to undo their results with the least imaginative government remedy of all: throwing money at them. It not only hasn’t worked, it has made things worse. We are told that private industry has two trillion dollars on the sidelines (Yes, lol it’s exactly two trillion! This seems the agreed upon figure). Why? Why the liberal/progressive types ask is this money not “put to work”?

But then “other sources” tell us that US banks may be on the hook for hundreds of billions if bad things continue to happen in Europe. Estimates I have read range from $640 billion to $1.3 trillion. Well now, that’s a good deal of dough ain’t it? Maybe, just a guess, that’s why there’s money on the so-called side lines.

Congress recently raised the US debt limit and we are blowing through that with celerity. Money now just disappears! One of the many flaws in socialism is lack of a price mechanism. Now the price is being paid. Relentlessly, remorselessly. Those are the chickens Rev. Wright et al.

But wait. I am an optimist. It is indeed an ill wind and all that. Who would I rather be: The 44th or the one seeking to be the 45th?

Close election is one of the MSM’s current group thoughts. I doubt it. # 44 and his European counterparts may be able to produce some decent economic news, but it will take a near miracle. Jon Corzine bet the house and lost it all when Greek debt was cut in two and Italian bond yields went up. The same Corzine whose sagacity on all things financial was praised by VP Biden in 2009. (This is on video. Great stuff for a campaign ad.)

So 2012 will be about jobs and the economy the polls and frank common sense tell us. If so and without knowing the GOP nominee I like his/her chances. We here can debate about electability, records, flips and flops, but if our candidate can fluently explain how Obama and his ilk got us here and how the dynamic talent of the American people will get us to a much better place we have a winner.

Added 11/28-News from and about the Eurozone is ever more ominous. The poorly received German government bond sale and fast rising yields on Italian bonds means the Eurozone government bond market is seriously damaged for at least the short term. Morgan Stanley thinks a European recession is likely and the US economy will continue to grow “below trend” Goldman Sachs warned Friday that European fiscal problems are metastasizing from government into corporate and personal sectors threatening another deep recession a’la 2008-2009.

Here’s a question: How much will the US contribute to the reported IMF bailout of Italy? Reports give a figure of about three-quarters of a trillion dollars, but don’t say where it will come from.