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The Iowa Caucus…and Beyond

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With days remaining until the first actual vote of the 2016 season, the myriad of issues that remain undecided still are quite remarkable. Is Trump still leading? Is Cruz fading? Does Rubio have a chance? Is Bernie’s surge real? Will Hillary blow it once again??

So where do we stand?

1. Either Donald Trump or Ted Cruz will win the Iowa Caucus.

I think everyone feels comfortable with this prediction. Marco Rubio will very likely finish third.

The question is how they place, and what the spin the day after will look like.

For either Trump or Cruz, a loss would be devastating to their case. For Trump, he has argued for six months that he the is king of the hill, routinely pointing to poll after poll that shows him on top. In fact, when a rare poll showed Cruz leading, Trump literally whined to the voters of Iowa: “What are you doing to me?”.  A loss would undermine his case that he is the inevitable nominee.

For Cruz, a loss would in some ways damage him even more. There is no state in the country that is more perfectly built for Ted Cruz than the Iowa Caucus.  It is traditionally dominated by Evangelicals and social conservatives; and even more so, virtually all the major leading traditional religious leaders in the state have come out and endorsed Cruz. Cruz has spent more time and money in Iowa than anywhere. For him to fall to second to Trump would be a hard pill to swallow, and would make many once again question his entire electoral strategy.

Rubio is very likely to finish in third in Iowa. Trump has shown a small surge in the last month, and Cruz is actually dropping in the polls after a surge late in the year. Rubio has seen a slight uptick. There is no better reason to believe Rubio is having a slight surge than this: in the past few days, the Cruz campaign has shifted their ad dollars in Iowa from targeting Trump…to targeting Rubio. Their internal polling must be showing something significant.

A finish lower than third in Iowa for Rubio would be catastrophic. It is hard to seriously consider any conservative candidate that can’t finish in the top 3 in Iowa. The rest of the repercussions of Iowa is up in the air. A close third place finish is likely to catapult him into New Hampshire, because of the ‘expectations‘ game being so low for him to begin with. Rubio’s only goal is to get one of the three ‘tickets’ out of Iowa, so he can make this a three-way Rubio/Cruz/Trump race going forward, and slowly push Jeb Bush, Chris Christie, and the others out the door.

2. The GOP race is too close to call.

As said above, either Cruz or Trump will win…but which one?

There are a number of variables that will help decide who wins the slugfest between Trump and Cruz…and all are unknowable, largely for the same reason: Trump is a wholly unquantifiable factor.

First and foremost is voter turnout. Polling in the last week has been telling; most show Trump with an approximately 7 point lead this week over Cruz. But what is interesting is that lead dramatically changes based on how your turnout model is set. If you expect a record turnout of around 200k voters, Trump wins by greater than 10 points. If the turnout model is closer to the record-setting 2012 Caucus, where about 130k voters cast their vote, Cruz and Trump are tied.

Compound this with the turnout infrastructure of both campaigns. Cruz’s state infrastructure is second to none. He has his own campaign staff, along with the well structured Evangelical base in the state, to help drive up turnout among his voters. Trump has..virtually no apparatus. He is largely depending on the enthusiasm of his voters. It will be a great future case study on how each philosophy works in practice.

But again, look at the above numbers. Trump’s lead has now surged to 7 points.  Cruz would not only have to hope for less turnout overall, but asymmetric turnout of his supporters. If you are a betting man, you put your money on Trump slightly at this point.

3. The Democrat Race is close…and in many ways similar. 

In many ways, the Democrat race is a strange mirror image of the Republican race. Bernie Sanders is the outsider, running an unconventional campaign based on enthusiasm, while Hillary Clinton is the established candidate with an extensive, long built statewide infrastructure.

Additionally, the polling is also similar. The race is a virtual statistical dead heat. Unlike the GOP race though, it is Sanders with momentum, while Hillary is not only stagnant..she has been slowly been hemorrhaging support for months.  Her favorability ratings continue to drop among Democrats, and she has not found of any way to reverse that trend.

4. What happens next?

This is the most important question of all. Historically, the Iowa Caucus is a poor predictor on the Republican side over the past two cycles; Santorum and Huckabee won the last two, after all. On the Democrat side, as discussed above, if Hillary wins, she may shut the door on Sanders, even though he will persist in the campaign. If she loses, Sanders finally for the first time could see a viable path to the nomination; not a likely one, but at least a possible one.

The GOP side is cloudy, to say the least. Trump’s ideal strategy is to win Iowa and New Hampshire, claim that he is the inevitable nominee, and then convince the core of the party to unite under his banner. I question whether this is possible; will the majority of the party unite under Trump, unless absolutely forced to? Regardless of Trump’s lead, he has never been able to get above 40% of the GOP primary vote. Traditionally, a nominee needs to win over 50% consistently to get the nomination. He still has some work to do.

The paths for the others are even far less clear than Trump’s.

Cruz must win or at least do well enough in Iowa to claim some sort of victory. A bad finish in Iowa, regardless of placement, would stain Cruz’s argument that he is the viable conservative alternative to Trump. If Cruz does well in Iowa, he can proceed to New Hampshire and South Carolina as the ‘rational’ alternative, and hope that the Party’s innate hate of him will be overcome by the rational decision that Cruz is a far superior general election candidate.

As for Rubio, I’ve been saying for weeks that his strategy is all about threading the needle. He needs the media to turn his third place finish in Iowa into a ‘victory’ of sorts. Furthermore, his team prefers if Trump wins Iowa, in the hopes that the result will send Cruz spiraling.  He then can go on to New Hampshire, claim the flag of the Establishment, and hopefully finish second. That would, in turn, slowly push out the other mainstream candidates, at which time Rubio can consolidate that vote, rightfully claim he is the most viable General Election nominee, and head toward Super Tuesday.

Don’t ask me to say what is the most likely scenario of those; I simply have no idea at this point.

 

If I was forced to put money on who wins Iowa next week, I’d focus on a few key metrics: their current poll standing, momentum in the polls, and infrastructure to drive out voter turnout.

On the Democrat side, the candidates are tied, and momentum is on the side of Bernie Sanders. Can Hillary drive up turnout to counter that enthusiasm from the Progressive wing?  My gut tells me Hillary wins by a hair, but 8 years ago…I would have said the same thing, and she finished in third. If Hillary wins, this race is likely over before it starts, as Sanders simply doesn’t have the ability to fight Hillary in many of the later primary states, especially in states unfriendly to Progressives like the deep South.

On the Republican side, using the same three criteria,  you have to give Trump the edge. He leads in the polls, and has momentum. Cruz will narrow the margin some with his turnout machine, but I doubt it will be enough. Again, like many times before, the story of the night may be the loser; if Rubio can finish a close third to Cruz, that would damage Cruz even further. Cruz’s ideal scenario, if he doesn’t win outright, is to stay close to Trump, crush Rubio, and make this a two-man race. I think that is unlikely at this point.

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2010 Predictions…A Look Back

So you can see my predictions of the year 2010 here, if you wish.  My 2010 predictions weren’t too bad…but in hindsight, I have to say that I have outdone myself.  Regular typeface is my original prediction, and bold is my current commentary…

  • President Barack Obama will sign a health care reform bill…but not until well after the State of the Union, and only with a lot of difficulty.  Democrats will fight another civil war on the public option, taxes, abortion, and illegal immigrants.  CORRECT!
  • Democrats will try for a third stimulus, in which Obama will try to focus on tax cuts, but progressives in the House will push him to spend more on government programs.  CORRECT!  ASSUMING YOU ARE COUNTING THE CURRENT TAX BATTLE.
  • Obama’s Budget Director forecasts a 4.0% growth rate next year…the rate of growth will be much less, closer to 2.5% for the year.  SO FAR, ACCURATE.
  • We will see narrowing of job losses in the beginning of the year, but some of it will be smoke and mirrors as the government hires 700,000 temporary workers to carry out the 2010 census.  By the end of 2010, the overall rate of unemployment will still be in the double digits.  CLOSE.  WE ARE SLIGHTLY UNDER 10%.
  • The stock market will have a mediocre year, rising 7-8% to around Dow 11,300 by the end of next year.  Businesses, however, will again be profitable.  Hiring will start in earnest in the end of 2010.  NOT BAD…THE DOW IS UP ABOUT 8% FOR THE YEAR.
  • The Federal Reserve, in a bid to halt inflationary pressures, will increase Fed rates by middle of the year.  The dollar will actually gain value…and gold will stabilize or drop in price.  However, oil prices will rise to around $100/barrel.  WRONG.  THE FED IS STILL TRYING TO FLUSH MONEY INTO THE SYSTEM.  OIL IS AROUND $80.
  • Legislatively, Democrats will have greater and greater difficulty in passing anything.  Cap-and-trade, immigration reform, and card check will all die an ignoble death.  TRUE.
  • Obama’s attempts at budget deficit control will go to naught, as Democrats fight among themselves over which they should do:  tax increases or budget cuts.  Ultimately, nothing will be done, and the deficit for 2010 will be around $1.5 trillion…or about the same as 2009.  In other words, matching the largest national yearly deficit in world history.  CORRECT!
  • Almost nothing will get done by Congress, as Democrats (not Republicans) will virtually bring the legislature to a standstill.  FALSE.  REPUBLICANS STOPPED MOST EVERYTHING, TO THEIR CREDIT.
  • By summer, Tea Party protests will be ravaging the nation, as the protesters fight for control of the Republican Party.  Conservatives will be pitted against moderates, and in most races, the conservative will triumph; for example, Rubio probably will oust Crist in Florida.  Democrats will giggle in glee, remembering the outcome of NY-23.  But who has the last laugh?  ABSOLUTELY, POSITIVELY CORRECT!
  • Obama’s poll numbers will stabilize in the spring, as unemployment numbers artificially are leveled off.  However, as the year progresses, and unemployment stays in double digits, Obama’s popularity will drop below 40%.  As time goes on, Obama will be blamed more and more for the economy, and his laying the blame with the prior administration will sound more and more like whining.  FALSE.  ALTHOUGH MUCH IS TRUE, OBAMA’S POPULARITY HAS LEVELED IN THE MID-FORTIES.
  • Republicans will gain 8 Senate seats.  I will be more specific in my 2010 election prediction article, but briefly I predict Arkansas, Colorado, Connecticut, Delaware, Illinois, Nevada, Pennsylvania, and New York to flip (I know, I am an optimist).  I predict Republicans will pick up 40 seats in the House, just short of the majority, but will try to entice additional Blue Dogs to switch parties.  It will be that close.  2010 will be a historic landslide, ala the Second Republican Revolution.  NOT BAD!  REPUBLICANS GAINED 6, NOT 8, SENATE SEATS.   AS FOR CONGRESS, I WAS CLEARLY PESSIMISTIC, AS THE GOP PICKED UP 63 SEATS…BUT CORRECT ABOUT THE LANDSLIDE!

As for my ever pathetic sports predictions:

  • Alabama will defeat Texas for the BCS Championship.  CORRECT!
  • The San Diego Chargers will finally break through and win the Super Bowl.  NOT QUITE.
  • Kansas Jayhawks will win the NCAA Basketball championship.  NOPE.
  • Pittsburgh Penguins will repeat as NHL Champions; the L.A. Lakers will repeat as NBA championships in a classic series over the Boston Celtics.  LAKERS CORRECT, PITTSBURGH NOT SO MUCH.
  • The United States will finish 3rd in the medal count at the Olympics.  WAY TOO PESSIMISTIC!
  • The Red Sox will outduel the Yankees, and win the World Series.  NOT EVEN CLOSE.
  • O.K., my ‘homer’ picks were horrendous last year.  Here we go:  The Pistons will miss the playoffs, and get the 8th pick in the Lottery.  The Red Wings will lose in the 2nd round of the NHL playoffs.  The Tigers will miss the postseason once again, this time by 5 games.  The Lions…who cares; I am a Redskins fan!  The Skins will get Mike Shanahan as coach, dump Jason Campbell as QB, and will draft Sam Bradford with their first round pick, which will guarantee that he will be a major flop in the NFL.  And my beloved Michigan Wolverines will get back to a bowl…but only an average one.  FRANKLY, NOT BAD, NO?

Oh, and of course, the obligatory JibJab piece:

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India: Democracy in Action

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The most massive, engaging example of democracy started yesterday, as the Republic of India started their national election.

India’s 714 million registered voters — more than any other country; more then the entire European or North American continents — go to the polls for approximately one month of voting.   Turnout is running as high as 86% in some districts…a number that any country would be envious of.  The voting wraps up May 13, after which political parties will try to form a government and pick a prime minister.

Of course, nothing is perfect in this country of 1.1 billion people.  15 people were killed in the initial hours of the election, primarily by terrorist Maoist rebels.  And corruption continues to run rampant, with many parties paying people to vote in their favor.

Additionally, the election is far from messy.  In the Indian Parliamentary system, coalitions rule the day.  The Congress Party, which controls the current governing coalition, has lost several key coalition supporters in the past few weeks. Additionally, its standard bearer could be Rahul Gandhi, the 34 year old great-grandson of Jawaharlal Nehru, grandson of Indira Gandhi, and son of Rajiv and Sonia Gandhi.  The oxymoron in India is that democracy is vibrant, but leadership is still largely based on star power and nepotism.

However the BJP, the main opposition party, is unlikely to have any larger majority either.  The smaller players are using the division to their advantage.  Kumari Mayawati, a Dalit leader from the most populous state, Uttar Pradesh, has dreams of being the first lower class person to become Prime Minister.  And then their is former Tamil Nadu Chief Minister Jayalalitha, a former film star fond of wearing capes from the large southern state, who is always looking for ways to increase her personal power.

One major problem in India?  The educated don’t vote.  That is right.  Most of the voters in India come from the poorer (and therefore uneducated) classes.  This has been a major problem since the birth of the nation, and does not seem to be changing any time soon.

In a country as diverse and large as India, it doesn’t matter so much who wins.  The country, unsurprisingly, is largely ungovernable, and yet maintains a sense of peace, and is starting to grow in prosperity.  The key lesson to learn from India is not the negatives, but the positives.  More Muslims live in India than any other country in the world other than Indonesia.  And yet, they probably have more rights in India than almost any other country.  Woman freely vote and run for election, with many being able to openly contest for the highest positions, with little or no commentary on their sex.

India is far from perfect.  But one thing is for sure:  India is an example to the world on carrying out representative democracy.  For all  of its imperfections, this is one thing India can be proud of.

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Is Obama More Partisan Than Bush?

Obama,the divider, not a uniter...

Obama,the divider, not a uniter...

http://www.cnn.com/2009/POLITICS/03/20/ron.paul.stimulus.transcript/index.html

http://www.cnn.com/2009/POLITICS/03/20/bonus.bill/index.html

I am sure liberals will love me after I make this suggestion.

All I can wonder is whether this man really is any type of agent of change, as he proposed during the campaign.  We on the right have always thought this was more rhetoric than reality.  The more I watch him, the more I have come to a simple belief:  Mr. Obama is a classic partisan, despite his rhetoric otherwise.

George W. Bush, like Obama, came into office as a politician that would put partisan divides aside.  Bush was the uniter; Obama came in as a post-partisan.  Bush, unlike Obama, came into office with much debate and contention because of the Florida election mess in 2000.  But ultimately, Bush was able to garner some Democratic support for his major initiatives, such as his tax cuts and No Child Left Behind, which was written partially by Ted Kennedy (for good or ill).  Remember, Democrats actually voted for Bush’s tax cuts; the Senate passed the bill 65-35 with 15 Democratic votes, and Democratic Senator Zell Miller was actually a co-sponsor of the bill.

Now compare that to the present.  Barack Obama could only get three Republican Senators to support his stimulus bill, and it is unlikely that his budget will get any more Republican votes, considering Democrats are even balking at the bill.  Now, you can either blame that on Republicans (which Democrats and the media are more than happy to do) or blame it on the President for his lack of effort for bipartisanship.  I will take a note from Democrats in the past, who blamed Bush for the lack of bipartisanship, and say that this is largely Mr. Obama’s fault.  Consistency avoids hypocrisy.

Mr. Obama is following Mr. Bush’s steps, and taking them a step further.  Democrats accused Bush of running a permanent campaign; Barack Obama is turning the permanent campaign into an art form.  The problem with an ever lasting campaign is that campaigns tend to polarize and demonize, and that is exactly what this White House is doing.  The Economist states the case, and gives a simple answer:

Why is Mr. Obama abandoning of his campaign pledges? Partly because he is surrounded by hard-nosed strategists, such as David Axelrod, who excel at campaigning. But also because he is worried about his political momentum. The administration’s difficulties with various nominees have created an unfortunate impression of incompetence. His poll numbers are sliding. And the combination of pork-stuffed legislation and scandal-riven bail-outs threatens to create a populist backlash.

Others are starting to have the same belief, and some are Obama supporters.  The most notable is former Republican Senator Lincoln Chafee, who supported Barack Obama in last years presidential race.  However, this week in an interview with the Huffington Post, Chafee appears disturbed by the hyperpartisan way that the Obama administration has appeared in its first months in office.

“The whole appeal of the Obama candidacy was post-partisan, and to get off to that start I thought was surprising,” said the Rhode Island Republican. “Ultimately, the chief executive has so much power, and just as a spectator, I thought the onus was on him to just to make it happen. Get 80-or-so votes on your first big initiative, whatever it is. To get off to that start, really, I was stunned about that vote in the House. Oh, come on! You’ve got to get that first vote, whatever it takes,” Chafee added. “It was kind of sloppily put together or something and it just gave to partisan oxygen.”

Chafee’s comments speak volumes.  Chafee, for all practical purposes, has acted like a Democrat for years.  He is the most liberal Republican I know.  He makes Colin Powell look ocnservative.  That said, Chafee is highly critical of the way Obama and his officers have acted in their few weeks in office.  However, Chafee isn’t the only moderate Republican with this view.

“On the stimulus everybody voted against it for a number of reasons, some reluctantly and some gladly,” said former Rep. Charlie Bass, a self-described moderate New Hampshire Republican who now heads the centrist Republican Main Street Partnership. “Early on, and I know this because I was in meetings with them, there were a number of Republicans who would have supported the stimulus. But they were abandoned when it became clear Democrats didn’t need them. It was fair-weathered bipartisanship.”

And that really is the point.  Mr. Obama doesn’t really understand what it takes to be bipartisan.He keeps on talking about being transformational, without understanding what it takes to accomplish that.  To be truly bipartisan you sometimes have to go against your own party’s wishes.  Bush went out of his way to act bipartisan with Democrats, naming a building after a Democratic congressman who was ill, and inviting the Kennedy family over to watch movies in the White House.  Mr. Obama, too, has had outreach.  But to say that Mr. Obama has done anything more than former President Bush in this area is a stretch.

And it isn’t just partisans that are starting to believe that Mr. Obama has become more a traditional politician.  In a new Pew Poll, 44% versus 30% of people say that Mr. Obama sides with liberal Democrats more than moderate Democrats.  That is a complete reversal of several months ago, when the same number, 44%, said that Mr. Obama was more of a moderate Democrat.  Also, although Mr. Obama still has widespread personal support.  some of the internal statistics are fascinating.  For example, 52% would be against increasing premiums for Medicare for the wealthy; and 48% are against removing agriculture subsidies.  Both provisions are ones that have been suggested by this administration.  The public is also evenly split on whether the President’s foreclosure plan is a good idea.

Obama has actually got into the grime of political fighting more than Bush.  While Bush attempted to be above the fray, Mr. Obama dived right in.  First he called out Rush Limbaugh, and had his surrogates start a full frontal assault on the radio show host.  This was an unnecessary distraction; or maybe it was a thoughtful, intended distraction.  Who knows.  Now, I know that Rush is an easy target for liberals, but does the President of the United States really want to get in a fight with a radio show host, even be it the biggest radio personality in America?  I think not.  It was purely a hyperpolitical move on Obama’s part, and has not helped portray him as the post-partisan he hoped to be.

Here may be the final straw.  Failling to convince moderate Democrats, not to mention all Republicans, of the rationale for passing health care reform and carbon taxes now, Mr. Obama is starting to consider using a parliamentary procedure called reconciliation to advance some of the biggest items on the president’s agenda.  Reconciliation reduces the number of votes needed to pass legislation in the 100-seat Senate to a simple majority rather than the 60 required to overcome resistance to major bills. The tactic also limits debate to no more than 20 hours and imposes restrictions on amendments.  Democrats before 2006 were adamant that reconciliation was wrong; of course, they were in the minority at the time, and Republicans basically didn’t use the procedure for any major bills.  Now, Democrats apparently have changed their mind on the ethics of reconciliation.

Use of reconciliation should be considered a ‘nuclear option’.  There is no return from that.  If Mr. Obama has any hopes of being a less partisan President than his predecessors, than he cannot use the parliamentary procedure.  If Democrats go forward, however, that should be the death knell of the post partisan presidency.

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The Audacity of Democratic Hope

http://www.cnn.com/2009/POLITICS/03/16/AIG.bonuses/index.html

AIG has been attacked from all sides regarding its awarding of $165 million in bonuses this weekend.  Mr. Obama was furious about the bonuses, and has asked his administration to see what is to be done.  New York Attorney General Andrew Cuomo jumped on the bandwagon, demanding that AIG give him a list of all people obtaining bonuses within three hours, or be ready for the repercussions.

Simply, people, you know who is responsible for this?  Mr. Obama and the Democrats themselves.

n 1993, Congress limited the tax deduction companies could take for cash payments to $1 million. The result was a cottage industry of lawyers, consultants and advisors who structure even bigger pay packages with creative legal strategies that now make the AIG bonuses difficult to rescind.

To compound matters, Congress missed the boat on regulations.  There were also no regulations to prevent AIG from making what Fed Chairman Ben Bernanke told CBS News Sunday were “all kinds of unconscionable bets.”  In fact, it was a law approved by Congress in 2000 and signed by Bill Clinton that allowed companies to place tens of trillions of dollars of these risky credit default swap bets.

Last fall, when TARP was being discussed, Republican Congressman wanted restrictions on how bailout money would be used, including some limitations on bonuses.  Democrats in Congress, as well as Hank Paulson, did not want any specifics in the bill.  They wanted quick passage, so that it would give them the most flexibility to respond to the crisis.

Now, we are seeing the after effects.  It is a joke for Mr. Obama to now complain about bonuses that he basically voted for.  It is also a joke, because Democrats have argued that all government spending is stimulus; well, then so is bonuses to employees, correct?  Everything is stimulus!  That has been their warcry for months.  Now, when they see that there is going to be a populist revolt against the bailouts, they are all of  a sudden worried about how the money is going to be spent.

Additionally, the outrage is idiotic.  The bonuses that AIG  are paying is 1/1000 of the money from the bailout (or, 0.1% of the $165 Billion that has been given to AIG).  Nobody seems to be worried about the other 99.9% of funds to AIG, or the 99.99% given overall.

To me, this is putting lipstick on a pig.  The TARP and bailouts were always a pig.  They are ugly, dirty, and full of fat.  For them to complain that the pork is all of sudden unpalatable is ludicrous, because they have pushed the pig on us from the beginning.  The bonuses for AIG executives is just a natural progression from the initial mess of bailouts.  The complaints now are too little, too late.

Makes me remember the good ole ‘lipstick on a pig’ controversy…ah, the good ole days.

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Bernanke: “Recession likely to end later this year…”

http://www.suntimes.com/news/nation/1478189,w-bernanke-recession-fed-chairman031509.article

Ben Bernanke, in a surprisingly open interview on 60 Minutes on Sunday, stated that the recession will likely end by the fourth quarter of this year, with little to no improvement in employment numbers until early 2010.  This seems to be just another response from the current administration’s offensive to build confidence in the economy.  President Obama, Treasury Secretary Timothy Geithner, and even Vice President Joe Biden have gotten into the act.  Christina Romer, Mr. Obama’s key economic advisor, went so far as to state that the economy is ‘fundamentally sound’; those exact words were used against John McCain by Barack Obama in the fall election.

In carefully hedged remarks in a taped interview with CBS’ “60 Minutes,” Bernanke seemed to express a bit more optimism that this could be done.  Bernanke stated that there was still much to do in stabilizing the financial sector, especially the banks.

“We’ve seen some progress in the financial markets, absolutely,” Bernanke said. “But until we get that stabilized and working normally, we’re not going to see recovery.  But we do have a plan. We’re working on it. And, I do think that we will get it stabilized, and we’ll see the recession coming to an end probably this year.”

He had some interesting comments on how to recognize a recovery.  Basically, he stated one sign would be private capital flooding into banks, which right now is not occurring.  That would signal private investor confidence in the financial sector.  Of course, he didn’t really mention factors such as the stock market, home prices, and consumer spending, all traditional ways to mark an economic turnaround.

Bernanke was very careful in not making any over the top statements, either positive or negative, to shake the markets.  He did try to instill more confidence in the Treasury and the Federal Reserve.  He was quite successful in portraying himself as coming from ‘Main Street’, as 60 minutes did a classic retrospective on his life, showing his hometown of Dillon, South Carolina, and telling his classic immigrant middle class background.

He did admit the Fed did not do enough to stop the financial crisis, though he did not give any specifics.  He did stress that further regulations would be needed, and implied that the high flying days of the nineties and the earlier part of this decade are likely over.  He chastised bankers and companies such as AIG who are giving large bonuses to employees and executives primarily for not understanding that the world has changed in the face of this economic tsunami.

Overall, Bernanke did a better job in explaining the link between Wall Street and Main Street than any single person in either the Obama or Bush Administrations.  He was certainly more self-assured and eloquent than Timothy Geithner has been.  As an expert in the Great Depression, he was clear and concise about the need for the Fed to take decisive action, and he honestly believes that we were days away from total collapse in October of last year.  And hopefully, his assurances that they will do everything in their power to mitigate the pain from the current downturn will slowly help renew confidence in the markets.

http://money.cnn.com/2009/03/15/news/economy/bernanke_60minutes/index.htm?postversion=2009031518

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Is the World’s Recession America’s Fault?

city-lights-world

http://www.cnn.com/2009/BUSINESS/03/14/g20.meeting/index.html

We are feeling the pain acutely at home, but one thing is clear:  this is a worldwide pheonomenon.  And although world bankers see a gradual bounce later in the year, others including the World Bank are not so confident.

The World Bank last week stated that the entire planet is going through its biggest negative economic cycle since the Great Depression.  The U.S., Europe, South American, Asia, Australia, and even Africa are feeling the after effects.  Developing countries, who sell much of their goods to developed nations, are feeling the pinch the most.

Here is the simple question:  Is this all America’s fault?

Here is the irony:  Americans are the first to believe this is our fault. Look at polling.  Half of people blame this recession solely on the shoulders of Former President George W. Bush.  That would imply that Bush, and the U.S.A., are at fault for this economic mess.

As usual, that is a very narrow and limited view of the world.

The leveraging of mortgages was a worldwide pheonomon.  To be sure, it originated in America, as most great financial instruments have over the past century.  But Europe (especially Spain, England, and Ireland), much of Asia and South America all used similar financing methods…which of course had terrible consequences.

Additionally, some of the Europeans rules hastened the crash.  For example, the infamous ‘mark-to-market’ rule was pushed by EU financial ministers for years, and led to many problems.

The G20 meets this week, and it appears that they are largely going to ignore President Obama, Treasury Secretary Timothy Geithner, and Federal Reserve Chairman Ben Bernanke’s recommendations of a large worldwide stimulus plan.  They will lay out a set of principles on how to address the toxic assets weighing on banks’ balance sheets, a person familiar with the matter said.  They also plan to reach an agreement to increase the funds available to the International Monetary Fund, although the final amount will be decided later.  The official said the G-20 will agree to require the registration of credit rating agencies, a move towards regulation of those companies that many developing country governments will welcome.

Ironcially, the roles have reversed somewhat.  The U.S., which traditionally has pushed for lower tax rates, is actually increasing taxes.  On the other hand, several European and Asian countries are pushing for tax cuts instead of big government stimulus expenditures.  The International Monetary Fund estimates that only Saudi Arabia, Australia, China, Spain and the United States will introduce budget boosts worth 2 percent of gross domestic product this year (with the possibility of Japan joining them soon), the level that U.S. Treasury Secretary Timothy Geithner considers ”reasonable.”

There is also much diversity on whether Hedge funds should be regulated by international bodies.  India, China, Russia and Brazil have called for greater oversight, while the west is more resistant.  For example, they would like to have more voice in the International Monetary Fund.  The EU, led by France, would rather focus on confronting the ‘toxic’ assets held by banks.  They feel, as I do, that until this is confronted the credit crisis will not resolve.  China, who is the largest foreign creditor to the U.S., this week raised concerns about the U.S. ability to pay those loans, which further increases the risk involved with Mr. Obama’s ever growing budget deficit.  It was enough of a concern that the White House put out a statement, declaring the U.S. debt to be the ‘safest in the world’.  China is worried that inflationary pressures with increasing U.S. debt would devalue their current holdings.

The one success out of the G20 is progress on tax havens. Under mounting international pressure, Switzerland, Austria and Luxembourg offered on Friday to partly relax strict bank secrecy in some tax evasion cases.  Welcome as the moves are to many other countries which fear tax evasion, German Finance Minister Peer Steinbrueck said that Swiss promises to relax secrecy in some cases was no substitute for more ambitious goals formulated by the OECD.  Additionally, China has been resistant to these rules, with obviously would hamper finanical industries in Hong Kong and Macau.  So a partial victory at best.

The reality is that Mr. Obama and EU ministers have reached no consensus on how to move forward.  Everyone agrees something must be done, but foreign financial ministers have lost faith that the U.S. has the knowledge or ability to satisfactorily respond to the crisis, and they seem to be unwilling to follow President Obama until he builds confidence in his financial abilites.  The President’s ability to corral these varying viewpoints into a singular financial solution for the world’s economic crisis could be the focal point of Mr. Obama’s first term in office.

http://money.cnn.com/2009/03/14/news/international/g20_meeting.reut/index.htm?postversion=2009031410

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UPDATE: Timothy Geithner stated that he is very pleased with the G20 conference, and feels the coordinated financial response of these nations will be adequate for the crisis at hand.

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Obama: Economic crisis “is not as bad as we think…”

obhappy

Don't Worry, I solved the economic crisis! Be Happy!

http://www.cnn.com/2009/POLITICS/03/12/obama.business.leaders/index.html

Mr. Obama, in a meeting with the executives of the Business Roundtable, claimed that the economic crisis is not all that bad, and that a recovery is imminent.

“A smidgen of good news and suddenly everything is doing great. A little bit of bad news and ooohh , we’re down on the dumps,” Obama said. “And I am obviously an object of this constantly varying assessment. I am the object in chief of this varying assessment.”

Of course, there is a reason for this varying assessment:  Mr. Obama himself. These statements go  against Obama’s own statements of several weeks ago, when he claimed we could go into an economic recession that we may not recover from.  Or even statements that he made last week, claiming the economic tsunami was worse than the Great Depression.  And this week, Obama’s people are trying to convince the Europeans prior to the G20 meeting that this is a once in a lifetime crisis, and they must take drastic measures to solve the problems in the world economy.

Well, so much for that.

I guess the fear tactic hadn’t only achieved so much, and now it was time to backtrack.  After scaring the country into passing the nonstimulative stimulus package, passing a omnibus bill with 9,000 earmarks, and now pushing his own budget which will add more to the deficit in the next 8 years than the United States has accrued since 1776, it was time to state that all is well, and nothing to worry about.

On the same day that Citibank and Bank of America both declared they may not need any more federal funds, that GM declared that they are still afloat until May, and the stock market bounced, Obama all of sudden decided that maybe it is smooth sailing from here.  I mean, come  on, he had 52 days in office; he has fixed everything!  Now, he will just part the Red Sea or make wine from water, and all will be well.

Mainstream media is (finally!) starting to ask themselves what is going on.  Megan McArdle of the Atlantic asks whether the predictions made by the Obama Administration are ridiculous:

Having defended Obama’s candidacy largely on his economic team, I’m having serious buyer’s remorse.  Geithner, who is rapidly starting to look like the weakest link, is rattling around by himself in Treasury.  Meanwhile, the administration is clearly prioritized a stimulus package that will not work without fixing the banks over, um, fixing the banking system.  Unlike most fiscal conservatives, I’m not mad at him for trying to increase the size of the government; that’s, after all, what he got elected promising to do… The budget numbers are just one more blow to the credibility he worked hard to establish during the election.  Back then, people like me handed him kudoes for using numbers that were really much less mendacious than the general run of candidate program promises.  Now, he’s building a budget on the promise that this recession will be milder than average, with growth merely dipping to 1.2% this year and returning to trend in 2010.

This is, again, coming from an Obama supporter.

When are we going to finally realize that we should not have blind faith in the Obama Administration?  Sooner the better, IMHO.  The confusion from the White House, especially from Obama and Geithner, is harming the economy.  I believe that Mr. Obama is trying his best, but really doesn’t have a clue what to do next.  He doesn’t have the courage to really do what he believes (e.g. nationalize the banks), and so he takes half measures that are unlikely to solve the problem.  On the other hand, he is not confident in the free market to solve the problem, and has avoiding giving the market the freedom to make the financial corrections necessary for sustainable growth.  This lackluster vision, neither claiming a big government nor free market solution to our problems, further has eroded confidence in the business community that this President has any idea where to lead this economy.

This situation just gets sadder and sadder.