@Foxfyre,
Everybody knows my wishes regarding the outcome of the general election but something has happened in the markets and this weekend that leads me to believe that McCain, in the next few weeks, will only have a less than 50% chance of winning--and that might be a generous assessment. Lehman has tanked, BOA (Bank of America) just bought Merrell at fire sale prices, AIG is in deep do, do and the Dow is down over 500 points--this is major ****. The Dow will probably regain some in the future but this may be the beginning of recessionary tendencies we will see in the future. This weekend, on ABC's
This Week Alan Greenspan, former Fed Chairman, said that a recession in the future was certain.
Further, Greenspan told how the global economy was in slow down mode and the U.S. would definitely be affected (The dollar's slide has been checked but the decrease in exports that this might imply will add to the U.S.'s economic woes). So Far the credit crunch has not affected U.S. companies too much simply because they were relatively flush with cash, but this cash will have been used up soon and to further fuel U.S. growth they will have to enter the credit markets which is exhibiting a dwindling supply--this means costlier credit which will inhibit investment in the economy which will slow down economic growth cut down on jobs and so on. Things could turn around somewhat but it doesn't look good for at least the next year and growth could well be flat for two to three more years. Greenspan did say the housing market could start to recover by sometime in 2009. Personally, I think the realty market will be down until the end of 2009, at best. But that estimate is deeply dependant upon our economy as is and without the new above facts taken under consideration.
Needless to say, if all this doom and gloom, or even more importantly its perception, comes to fruition before November the Public will be led to believe it is the fault of the republicans and that all citizens would be better served by an Obama presidency and a Dem Congress. The irony is that the opposite is true--at least the congress part. It is here that I must, sadly, disagree with Asherman on the faith he might have in the American people to make the correct decision for our country. Though I might be accused of elitism, I have not witnessed, in the past, a general American public understanding of either the credit crunch, the housing problem, fiscal policy, or monetary policy. Pity, because they follow simple economic principles of supply and demand (With some human greed involved but that, also, can be foreseen and countered). That's all these big words come down to. Even something like the Laffer curve (Government tax revenues increase, over the long run, when taxes are lowered) is easily understood. As well ,Fannie Mae and Freddie Mac as GSE's (Government Sponsored Enterprise) were public companies who reaped profits and distributed dividends and bonuses to Executives and Stockholders and then, when broke, had to been cleaned up with our taxpayer's dollars, that's the deal our government struck at their conception ( Not to mention empowering the likes of Barney Frank, but that's another story). To those who would throw up the Fed "Bailout" of Bear Stern's I would encourage them to ask Bear's stockholders how they fared before trying to argue that point.
Political voyeurism into American markets is, at best, too little too late, but usually inhibits or distorts market signals, prolongs crises, and generally makes things worse. The ethanol thing is another sad example of misallocation of both resources and taxpayer dollars. It seems that we demand that our political leaders "do something" so I guess we should be careful what we ask for.
I hope I am wrong about the economy but its not just me.
JM
