Markets slide because of….you know reality.

My man Jarvis found a quote from a stock broker worried that and Obama election will bring economic Armageddon. Jarvis extrapolates from this quote that the markets are scared of an Obama win, hence their drop. I would like to offer an opposing theory: reality. Let’s take a look at some possible factors in the US stock slide:

1. Major financial institutions investing trillions of dollars in assets that were massively over valued.

2. Banks, fearful of misvalued assets, have stopped lending to each other commonly known as the “credit crunch.”

3. Treasury and Fed actions to correct the situation have been historic, but have failed thus far to thaw the markets-

  • The Fed Finances JP Morgan Purchase of Bear Stearns
  • Fed and Treasury team up to finance the nationalization of Fannie Mae and Freddie Mac
  • Treasury bails out AIG
  • Treasury lobbies for and recieves from Congress a $700 billion bailout package. 

All of these not mentioning the numerous interest rate cuts and an economic stimulus package, have failed to reverse the negative trends in the US economy. So go ahead and try to deflect blame to the man that hasn’t been elected yet. But the facts on the ground are why the market is falling apart. Find another straw man.

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One Bank doing it right

The Washington Post is up with a cover story on a bank that kept to its classic lending rules and is doing just fine through this economic downturn. Turns out the local customers are doing well too.

Forget the Election, want a better economy? Get back to work.

Last week on ABC Tom Friedman put forth an interesting notion. I’ll paraphrase…

We had a railroad boom and bust that devestated the economy but we got a railroad system out of it. We had a dot-com boom and bust but we got the web and internet as we know it out of it. We’ve now had a real estate and credit boom and bust, we need to get a green revolution out it. 

The sentiment is one I couldn’t agree with more. The election is of course of critical importance. However, what we’re forgetting is that in this country, we the American public control our own destiny. We’ve been unwilling to do the heavy lifting as a nation to combat the problems of the future. Maybe this credit disaster and subsequent economic fallout will cause Americans to take stock. Not just of how we’ve all lived beyond our means for a half-century, but about how we use energy. 

Maybe now is the time for us to switch to LED’s and lower the thermostats, ride a bike a little more and drive a little less. Maybe, just maybe instead of buying that new, huge plasma screen we’ll buy that new huge solar panel. Maybe instead of collectively getting a little fatter, we can collectively walk a little more. The mass consumption of cheap energy and goods has led us into this mess. But reversing the trend may get us out. What if our economy boomed as we retrofitted millions of feet of residential and office space so it used less energy? What if the next boom was figuring out how to get more out of less material? What if we weren’t waiting for a presidential savior, but making a new reality for ourselves? 

You may not believe in man-made global warming. But that is hardly the point. The point is our lifestyle is not sustainable. As the future looms for India and China, do we want to be part of a global resource war? Or part of a solution to the carbon problem? 

There is a vaccuum of leadership around the world that no president can fill. WE must fill it.

It’s a Bird! It’s a Plane! No, it’s SuperFed!

It seems we’ve entered the age of the the super fed. Able to engineer and finance take overs like

 JP Morgan’s purchase of Bear Sterns. Able to take over Fannie Mae and Freddie Mac at a liability of trillions, able to broker a line of credit to AIG for 80 billion dollars.

 

At the heart of Super Fed are two men. Federal Reserve chairman Ben Bernanke

and Treasury Secretary Hank Paulson. Together they have done a remarkable job of keeping the economy afloat in a sea of turmoil while doing their best to avoid moral hazard on wall street.

This crisis is plenty scary and we haven’t seen bottom yet, but super fed has done an excellent job navigating a crisis that in another era would have caused a national depression.