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Thursday, September 27, 2012

SIMPLE SOLUTION ESSAYS: The Bailout Bill Passes Congress, President Signs the Legislation, and the World is Saved. Not.

Every so often I continue the serialization of my third book,  SIMPLE SOLUTION ESSAYS.  This posting from the Huffington Post occurred four years ago when the world was on the threshold of a Great Depression.  Barrack Obama was running against John McCain, and the terrible economy gave Obama the edge to prevail a month later.  Thus, compared to those days, the economy today is humming.  However, there is another dynamic at work this year:

The math basically works like this: if the Dow Jones industrial average goes up in the period from roughly Labor Day to Election Day, the incumbent president or party will likely retain control of the White House. If stocks head south in that key period, the challenger will likely stage an upset win.

So what is dominant?  The dramatic improvement over four years or that Labor Day to Election Day period?  If the Dow remains above 13,000 (it was 13,0020 on Labor Day this year and closed at 13,412 yesterday), this double advantage should seal it for Obama.  However, if the Dow sinks over the next month, who knows what will happen IF the economy as determined by the stock market is that important.  

So what's driving Romney.  Even though Obama is well ahead of Mitt Romney today, remember that just one week before the 1980 election, Jimmy Carter was in the lead over Ronald Reagan, 47% to 39%.  What happened?  Reagan rode the worsening economy wave and won in a landslide with the highest number of electoral votes by a nonincumbent presidential candidate.  Anyway, here is that historic article:

On 6October08 the Dow Jones Industrial Average at one point in the day crashed 800 points, again, a historic high, but settled at minus 370.  Thus, I had to comment, so my HuffPo of 7October08 expressed some sarcasm to those decision-makers not listening to me.  I blamed eight years of Republican rule, for their policy is to keep their hands off business:  let the free market economy rule.  Well, that was at the root of this great recession.


The Bailout Bill Passes Congress, President Signs the Legislation, and the World Is Saved. Not.


Well, on Monday, October 6, that crucial first Wall Street operational day after the rescue, the Dow Jones Industrial Average dropped a tad more than 800 points at one point--once again the worst one day drop in history--but settled at only minus 370, at 9956, about 30% lower than a year ago. For about the tenth time this past month in my daily blog I again underscored the danger of metastability. The fatal fear is that we are losing control of prices.

Reassuring, though, that the German, Paris and Tokyo stock exchanges have also all sunk 31% this past year, with London at minus 27% and China (Shanghai) a staggering minus 67%. They, too, all are bailing out banks and other financial institutions. Thus, you can't really only blame Wall Street, the White House, Congress, McCain and Obama. This seems to be a world-wide phenomenon.
Interestingly, precious metals have also dropped in the 30-70% range the past few months, even gold. Usually, investors switch to very low interest federal bonds or gold in time of coming crisis. Gold did rise a few percent today, but remains below what it was this past Friday. So there is some uncertainty in this reactionary front complicating the tea leaf readings.

The U.S., of course, sets the tone for the globe, and eight years of Republican free market policies no doubt laid the table for the crunch. The Bush Supreme Court aided by preventing state regulators from mortgage loan oversight (April 2007 decision). From all perspectives, this "keep the hands of government off business attitude" is the root of our financial crisis.

Ominously, my HuffPo prediction of $75/barrel oil seems to be happening, as NYMEX crude futures slipped below $90/barrel to $88.51/bbl, while the Brent Spot is now at $83/bbl. The growing world recession is reducing consumption, so there is weakening competition for the available oil. OPEC President Khelil today predicted that oil prices will continue to drop next year. Will we see $50/bbl oil in 2009? If so, don't be surprised if all those already announced billion dollar renewable resource projects begin to lose financial support. We saw it when Reagan became president in the early '80s and a decade ago when the price of oil (in real dollars) hit an all-time low. Here we go, back to the past again. See Chapter 1 in SIMPLE SOLUTIONS for Planet Earth. That's why it's ominous.

Comments (4):  Again, I quote from one of my responses—

I'm gratified that I have helped influence the thinking of at least one person out there. Only 6 billion or so more to go. I was surprised at the presidential debate today for Obama to actually state that energy was his #1 priority, especially with crude oil back down below $90/barrel. Maybe there is hope! Did you see those instant reactions to nuclear energy? Every time McCain touted this option, both men and women showed instant negative reactions. There seems to be a strong undercurrent of concern about this option. Likewise, when both mentioned renewable energy or doing something about global warming, the curve jerked upwards. Thus, the support is there. Unfortunately, the will is lacking. That has been the lament of all my HuffPosts. The simple solution, however, I still think, rests with those newfangled virtual portals...like The Huffington Post.

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Well Super Typhoon Jelawat slightly strengthened to 155 MPH, just 1 MPH away from Category 5 status:


Just a week ago, the strongest storm of the year, Super Typhoon Sanba, earlier at 175 MPH, struck Naha,Okinawa.  Today, Jelawat, slightly weaker, but still monumental, will not only make landfall over Naha, but through the next few days, also roll over all of Okinawa, then, by early Monday morning, in a weakened state, affect Tokyo.

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