Monthly Archive for September, 2008

By Andy

“Damn it, Steve … I’m a lawyer, not an economic theorist!”

Noting the above, understand that I don’t represent that I’m an expert on economic theories and how the bailout (or lack thereof) will affect Main Street or Wall Street. I can tell you that this whole mess has been fascinating to observe because it seems to have made strange bedfellows of George Bush and the Democrats. Could anyone, even 30 days ago, think that the Democrats and W. would team up on anything … and the House Republicans would stand in the way of approving such unholy work-product?

Aside from the grand theater that the bailout has represented, most Americans are not in favor of the bailout for the wholly conservative notion that taxpayers shouldn’t shoulder the burden of bad bets by Wall Street millionaires. And I mostly feel the same way, except for the fact that some of these bad bets put first-time homeowners in a home. But there is a deeper issue that may necessitate some form of bailout. I refer to the short term credit problems that is one of the resulting effects of the economic crisis.

My understanding is that in the past few weeks, short-term loans have become increasingly difficult to acquire for small businesses. As Jayne O’Donnell of USA TODAY wrote on 9/19 ,

Retailers typically fund their businesses with short-term lines of credit and long-term loans that usually require the company to meet certain financial conditions. If they don’t meet them, the banks can call in the loans. Retailers also can borrow for the short term against money due from customers or against their inventory, or for the long term by issuing bonds.

If I understand this correctly, retailers who don’t have long-term lines of credit set up, could be faced with the crushing issue of how to make payroll and/or pay for the operational costs of running their very large business. Extrapolating this to its logical small-business counterpart, the potential effect is sudden and widespread unemployment as these entities (which are understandably cash-poor) are shut down or at least placed in operational suspension as their ends don’t meet.

If all of the above is true, we are not looking at the second coming of the Great Depression, but we are certainly looking at teetering on the edge of a solid recession.

I invite your comments and corrections. The problem with government today, is that no one understands the remedies which are being applied to fundamental problems in the economy … including (potentially) the lawmakers who fix them.

A final slightly unrelated note. With JP Morgan now acquiring the assets of Wachovia, now is a good time to pick up a very high 1-yr CD with a teaser 5.00% APY offered prior to Wachovia’s collapse. Thanks to Bankaholic.com for that email newsletter .

Andrew Baharlias

By Andy

Despite the seeming unanimity of the post-game polls, there was no clear “winner” in the debate Friday night. This could be considered a major win for Obama. Running out of time and options with which to take back the lead, McCain needed to appear as a commanding statesman and instead appeared as a peevish, somewhat crotchety senior. If there is a resultant large bump in Obama’s favor, it might be a sign that the American public is finally connecting with the man the way I connected with him after reading his books—or that they’re disconnecting from McCain. In either case, there is an excellent chance that this race could be over.

Even with the negative vibes, McCain still marginally held his own on the subject of the economy by resorting to the old trick of focusing on a trivial matter and repeating it ad nauseam until it seems like a serious matter. Pointing out Obama’s pork-barrel requests on at least 3 occasions in the span of 2 minutes is what I am referencing. Almost simultaneously, McCain seemed out of touch when he interjected his proposal for a $5000 tax credit for health insurance. Obama could have responded that any person with a preexisting condition searching for health insurance on the open market would not be helped by $5000. Failing that, he still succeeded in undermining McCain’s pork-flavored tirade by contrasting $18 billion of pork to the $300 billion in tax cuts McCain is offering to the wealthiest corporations and persons in the United States. It was a surprisingly brilliant response from a Democrat—they normally focus on refuting the attack rather than refuting the point—and it reflected Obama’s longstanding position that the citizens of this country are not stupid and can make objective, rational decisions if given the proper facts.

Still, in spite of Obama’s excellent retorts on some issues, he may have lost ground on others because he was far too deferential. He began by thanking McCain profusely on camera (but prior to the debate beginning) for just showing up, and then continuing his affability by stating, “I agree with John on…,” or “John is right on…,” Obama may have missed the memo warning him that agreeing with your opponent mostly nullifies anything you may say after the concurrence. How many times did McCain agree with Obama? Zero. McCain’s bombastic pugnacity may have nullified this effect to some degree, but if continued into another debate it may begin to resemble passivity.

In this debate the American people were given an opportunity to see each man for the first time as would-be President. I’m biased, but Obama just seems more presidential. He’s intelligent, articulate, conveys strength, passion and a genuine desire to change this country for the better. McCain is presidential in his own way, I suppose, but it seems as if his time has passed. A McCain presidency ending in 2008 might have been better than the last eight years of hell (if one is to believe that he would have kept to his moderate Senate record prior to 2005); however, a McCain presidency that would begin in 2009 would be an instant anachronism.

Andrew Baharlias