U.S. Economy • 16 March 2008 • The SnowBlog

U.S. Economy

           To loosen up the markets where liquidity is a problem, particularly following the collapse of Bear Stearns stock, the U.S. Federal Reserve has earmarked $400 billion in funds which it will use to do things like guarantee otherwise dubious investments, such as sub-prime related loans. It seems unlikely to acquire much of material value in exchange, beyond some hearty gratitude from a few major campaign contributors who would otherwise be facing the consequences of their reckless investment decisions. In other words, this is a stealthy bailout using public money (by the staunchest supporters of the free-market). 

Given that this is just the first of these collapses, it's going to get expensive quickly. I've only just finished boggling at the extent to which America has been running its economy on credit, the fact that it's committed itself to costs of $3 trillion over Iraq - and now it's spent another $400 billion in just a few days.  I can't imagine how these bills are going to get paid. 

Massive worldwide investment in the U.S. at low interest rates just doesn't seem like it's going to be as popular in 2008 as it's been for the early years of this century. And as for America earning the money rather than borrowing it (quaint as that idea sounds), I'm just not seeing that either. Even then, someone would probably have to put corporate and capital gains tax rates back where they used to be - which isn't going to happen while there's a Republican in the White House. And anyway, the latest economic figures aren't good. If only congress had let President Bush dump the entire Social Security fund into the stock market as he'd wanted. Burning the furniture would have kept investors toasty for a while longer. As it is, with oil at record prices, I have no idea how an administration with zero track record in economic stewardship is going to avert a comprehensive crisis.

The only wild schemes which occur to me concern Bush Senior's old mentor Richard Nixon. Who, the story goes, didn't like anyone dating his daughter, but let G.W. Bush do so, on occasion, so close were the families. It's not an alliance the Bush family ever seems to allude to. But perhaps, like Pres. Nixon, it's time for G.W. Bush to hop on a plane to China and try to do a deal. In Nixon's time, it made him appear statesmanlike and stopped the press from giving him a hard time (because they couldn't very well undermine him as he was playing ambassador). Could it work for the current incumbent? Is there a trade/investment deal to be done and is he the man to do it (all evidence to the contrary notwithstanding)? Or will he just look on as the recession hits, just as he did when Katrina hit, and try to think of a way to blame it on Al Qaeda?

An aside, and rather an impertinent one (though hopefully neither the man concerned nor his friends or family will read my words) but take a look at the guy running Bear Stearns, Mr. James Cayne: 05cnd-bear2.jpg Does he not look as though perhaps he is undead? Surely no living executive looks like that.


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