Two days ago, my good buddy MJ posted a comment on the post regarding how I voted.  One of his questions was how the Republicans would have faired against Barack Obama if Romney were their man instead of McCain.

To be honest, I’m not sure it would have mattered.  Taking a step outside my own viewpoint and looking at the overall campaign Barack Obama ran, I’m not sure the Republicans had a big name they could put up against the man from Illinois and stand a fair chance in the same economic environment that McCain had to operate in.

As I mentioned in a quick response to MJ, Barack Obama had the charm and charisma that is almost uncharacteristic of a politician, regardless of affiliation.  He has a way of communicating that sucks you in, mesmerizes you, and you go away feeling part of his team.  The problem is, he really doesn’t say much at all, you know you like what ever it was, you just don’t know why.

Try this: Watch a speech given by Barack Obama, and try and quantify how you feel after watching.  Then, sit down and read the transcript of what he just said.  If you remove the charisma and charm, his message takes on a whole new meaning.  Or at least less of one.

In my opinion, if this election were held 10 months ago, Barack Obama doesn’t stand a chance.  Given the nature of our political system, capitalizing on such a widespread event like a severe economic downturn that affects nearly everyone, the minority party will beat the incumbent 9 times of 10.

I take issue with MJ’s other statement, though:

I said it before and I will say it again, the economy is hurting and until programs are put together to keep people in homes and save banks, instead of programs just to save banks, the current course of events will continue until things bottom out.

I disagree.  Putting a program in place to keep people in homes is like trying to fight a war without taking casualties. There are two types of people that are being forced out of their homes: the type that couldn’t afford the home in the first place, and the type that gambled on variable rate interest rates when interest rates were at an all time low to begin with.

You won’t solve any economic problems by keeping people in houses that couldn’t afford them in the first place. Even if you (and I mean YOU because the government would spend YOUR money to do it) pay off their mortgage all together, their income levels won’t support the local economics of their neighborhood as it would if they had their own money to make the monthly payments.

The other type, the type that gambled on moving interest rates, are arguably collateral damage.  You could say that they were taken advantage of, and to a certain extent I agree, but it doesn’t justify bailing them out of a decision that was ultimately their own.  No one should know and understand your finances and investments better than you.  And if some one convinces you that a 4% variable rate mortgage is a good idea when rates really can’t go down much more, that’s on you pal.

There is another type of person that is being forced out of their homes right now, and those are the people that were living on the ragged edge of their means, even though they were making all their payments.  One lay off and they’re done.  You’ll have that during any economic down turn.

Bailing out the banks is another issue, as the economic effect of an illiquid banking system is more far reaching than the housing problem.  You have retirment accounts and pensions, along with other traditional investments that are predicated on a financial system that makes loans.  You have to keep liquidity in the banking system, or the banking system will fail at it’s sole purpose: lending.

That’s not to say I agree with how the government is going about stimulating the banks at all.

In the end, you’re going to see the course of events continue until things bottom out, regardless of whom you bail out.  The more money you use to do the bailing though, the longer it will take to bottom out.

MJ goes on to say:

It’s scary to see different companies reporting their earnings, because with each report an annoucement of job cuts of 3%-5% occurs.

True.  That happens in every recession.  Always remember, the harder the markets rise, the harder they fall.

You see job cuts follow earnings because job cuts have an immediate effect.  You tell an employee to stop working, and you stop paying them right then and there.

Capitalism will heal this problem fastest so long as the government doesn’t try to “help” it.  There are those that say capitalism is what got us into the spot we’re in, but what they forget is that it was Bill Clinton that tried to “help” it by pushing Freddie and Fannie to make loans to those who couldn’t afford them.  That’s not capitalism.

You can have capitalism, or you can have socialism.  You can’t have both and expect things to work out and differently than they have.

Tags: Economics | free market capitalism | Politics

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