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The Omega Letter Intelligence DigestVol: 13 Issue: 9 - Monday, March 09, 2009
OK- Now The Sky is Falling . .
In September of last year when Lehman Brothers filed for what was then the biggest bankruptcy in the United States, the Dow dropped a whopping 504 points.
On that same day in September, Senator John McCain lost the 2008 Election with these words: "the fundamentals of our economy are strong."
Ironically, McCain was right. The 'fundamentals' of our economy didn't change -- a better word description might be to say the fundamentals of the economy were exposed. America discovered that it had been mugged.
And like an angry mugging victim thirsty for revenge, it lashed out as much at the cop on the beat for not preventing it as it did the muggers.
The muggers became linked in the public mind with the Republicans - something the Dems had been cultivating since the Pelosi/Reid takeover of Congress in 2006.
One can argue all day about how the Republicans are responsible and how Obama inherited a bad economy, but the facts are neither Republican or Democrat.
When Nancy Pelosi and Harry Reid announced in 2006 that they were going to fix the "Bush economy" the "Bush economy" had enjoyed more than 55 months of steady growth.
When the new Congress was seated, the Dow was celebrating the recovery of all its losses since 9/11, closing above 11,000 for the first time since. This isn't partisan stuff, this is history.
In January, 2006, George Bush was a lame-duck president presiding over a Congress dominated by the other party. It was after Pelosi/Reid seized the majority and started fixing the Bush economy that it began to roll over, not before.
It doesn't matter what political party one belongs to, the history is still the same.
If there was a first domino that set all the rest of them in motion, it was pushed over after control of the Congress was handed to Nancy Pelosi and Harry Reid.
The Democrats began running for president long before they had a candidate, and they said from the beginning that their strategy was to focus on the 'Bush' economy -- which, as noted, was up to that time in pretty good shape.
Here's the thing to understand about the US economy. It isn't a 'thing'. It isn't a person. It is you and me. It rises or falls depending on how much confidence we have in it.
If I don't think my money is going to be safe if I leave it in the stock market, then logically, I am going to take it out and put it somewhere less risky.
So if somebody I admire and trust (like my Congressional leaders) tell me that the market is about to tank, and someone I've grown to despise and distrust (Evil Bush) says the market is safe, I have two reasons to pull my money out.
The first is to protect my investment. The second is to poke my thumb into the eye of somebody I hate (Evil Bush).
Multiply me times all the Evil Bush-haters that both feared for their wealth and enjoyed making Bush look bad who pulled out of the market and you have the beginnings of a recession.
After awhile, even those less enamored of Pelosi/Reid and less distrustful of Evil Bush are going to worry about their 401ks and rethink their exposure on the stock market. Which makes the numbers shakier and a recession more likely.
Keep shaking confidence by attacking the 'Bush recession' during the election campaign and the market will keep going down. Now here is where politics plays a role.
The Left campaigns mainly on handouts to the poor and taxes on the 'rich'. Let's define 'rich' and 'poor' as is applied in political theory.
'Rich' means white, middle-aged working professional couples, with no kids still at home.
(To the taxman, grandparents backed by a lifetime of investments and purchases are 'rich' -- even if they earn no more than a working couple just starting out.)
By our mid-50's we're as professional as we're gonna get, and we're making about as much as we can ever hope to, which we are trying our best to make stretch into our retirement.
'Poor' means single-parent families on food stamps, young parents still learning their skills earning entry-level salaries, and two-parent unskilled working couples with children.
There are more poor people who want handouts than there are 'rich' who want to fund them, the more the Left can demonize the 'rich' the more votes they can get from the poor.
That is not partisan politics. It is accepted political theory as was applied in recent political history.
When the 'rich' realized that the next likely president was going to be an ardent socialist, the 'rich' started yanking their retirement funds out of the stock market and steering them into what they hoped were safer investment vehicles.
All through the presidential campaign season, the market unravelled as nervous investors pulled out enough money to expose the crooks in the system. In August, Barack Hussein Obama secured the nomination for president.
In September, the unemployment rate jumped to its highest level in 5 years. As Obama began to outline his economic plans, more and more investors fled the market. By mid-October, it was going into free-fall.
On the day Obama was elected, the market had fallen from its peak of 11,000 when the Dems took over Congress to just over 9,000. By Inauguration Day, it had fallen to 8,000.
It has fallen by 1,400 points per week for every week Obama has been in office. If it continues to fall at the current rate it will be at zero before the end of April.
What is curious about this is the fact that Obama continues to talk down the economy, knowing the effect his words are having. If the President STILL says your retirement money isn't safe in the market, what do you do? And what effect does that have on the market?
So, WHY is he still slamming the economy?
Obama -- or his advisors, know the history of American recessions and how Americans get out of them. Or deeper into them. Higher taxes and increased government spending have the same effect on a national economy as compensating for a pay cut by spending more on your credit cards.
Nations can't borrow their way out of debt any more than individuals can. He knows that. So he is proposing a ten-fold increase in spending, funded by borrowing from the future and taxing present wealth, knowing it will only make things worse.
What is the end game? Rahm Emmanuel explained it over the weekend on TV. "You never want a serious crisis to go to waste. What I mean by that is it's an opportunity to do things that you think you could not do before."
Especially a crisis that was more than two years in the making. It's already paid off -- big time -- so why rein things in now?
Things are just starting to go their way.