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August 10, 2011

Turn off the faucet…and the lights

Kevin E. Dayhoff

It was a tough day in the world’s dystopian financial markets Monday as turmoil over the global economy turned into wide-eyed, white-knuckle fear and liquidity began a desperate search for a safe place to spend the night.


Watching the drama unfold was like watching the sequel to a “B” horror movie. Last Friday the stock market lost 4 percent of its value and last Thursday the Dow Jones Industrial Stock Average dropped 512 points.


The S&P 500 is now down more than 11 percent in three days, according to The Washington Post.


On Monday, the Dow fell 634 points, or 5.5 percent, according to numerous media reports including The New York Times, which noted that stocks suffered its sharpest drop since 2008 – since Dec. 1, 2008, to be exact.


Standard & Poor’s decision to downgrade the United States’ credit rating late Friday night heighten[ed] the economic anxiety coursing the country, a reality that threatens to have outsized political consequences as we head into the 2012 election,” observed Chris Cillizza writing for The Washington Post.


The story of the S&P’s Sovereign Ratings Committee to downgrade the nation’s credit rating for the first time since it began assessing the credit-worthiness of countries in 1941 quickly become one of a panicked sell-off in the stock market.


The financial world was certainly not reassured when the response by the Obama Administration to S&P’s dramatic decision was to blame the Tea Party “terrorists” and “tyrants” for the nation’s economic malaise.


Someday we will be thankful that S&P downgraded the nation’s credit rating and for the advocacy of the Tea Party to stop deficit spending.


The leadership of the Tea Party and the S&P decision has sent a clear message to Congress, the American public and to the Obama Administration that our national debt, structural deficit and over-spending must be addressed.


The American Left appears to have not received the memo. Toby Young wrote for The Telegraph of London on August 2 that “the real story of the US debt deal is not the triumph of the Tea Party but the death of the Socialist Left.” His piece is a must-read to understand the big picture from a global point of view. “[T]o focus on the Tea Party is to ignore the tectonic political shift that’s taken place, not just in America but across Europe. The majority of citizens in nearly all the world’s most developed countries simply aren’t prepared to tolerate the degree of borrowing required to sustain generous welfare programmes any longer.”


In addition, less than helpful is the uncertainly fueled by the president’s populist pre-occupation with punishing the capital markets and the job-creating class.


There will be no economic recovery or rebound in employment until a coherent and consistent business and economic plan is developed by the administration that does not include more red tape, over-regulation and tax increases to pay for a European-style social welfare state that no one can afford. Meanwhile, the mood of the nation’s business leaders is turning from annoyance to anger.


The business community was certainly not reassured when it was announced Sunday, amidst a growing economic tsunami, that Treasury Secretary Timothy Geithner will not be leaving the administration.


One needs to look no further for the financial markets’ confidence in President Barack Obama’s leadership to lead us out of this mess than the 400 points the market dropped after he spoke Monday afternoon in an attempt to reassure the nation.


The Hill reported, “President Obama tried to reassure the markets in a midday statement, insisting the U.S. will ‘always be a AAA country,’ regardless of what one agency decides.”


Actually, what the world needs now is a leader with a plan and not more partisan-oriented, cult-like populism.


Even The New York Times observed that “the stock sell-off picked up speed even though President Obama sought to calm markets, telling reporters that ‘our problems are eminently solvable and we know what we need to do to solve them’…”


Let’s be perfectly clear, there is no one-single reason for the recent partial collapse of the world’s economy, and President Obama does not deserve all of the blame – only most of it.


The straw that broke the camel’s back Monday is really a toxic-stew of anxiety and anger that boiled-over, in part, at our nation’s leadership failure to address raising the debt ceiling until literally the 11th hour.


Not to be overlooked is the fact that the debt ceiling was raised without a sufficient reduction in deficit spending, or any discernable plan to deal with the continued economic malaise except finger-pointing, scapegoating and partisan talking points.


Writing for The Hill, Molly K. Hooper reports that former aides to President Bill Clinton are saying that President Obama “lacked clear message during debt-ceiling talks.”


That fear and anger was only made worse by a lackluster improvement in the unemployment figures last week and continued fears over the economic stability of Italy, Spain – and Ireland, Greece and Portugal.


Relatively unmentioned is the markets’ pressure on the French bond market, China’s economy starting to sputter, Fannie Mae getting ready to ask the U.S. Treasury for another $5.1 billion, and American International Group suing Bank of America for its losses at the beginning of the mortgage-financial crisis.


Throwing more gasoline on the fire, according to Ms. Hooper, on Monday, “… a few hours into the day's trading, S&P announced that mortgage giants Fannie Mae and Freddie Mac were having their credit ratings downgraded also.”


For additional context, last Saturday America lost 30 service members in Afghanistan – in the single deadliest day in a decade of war in that God-forsaken, far off land. And rioting in London spilled over into the beginning of week.


At this point, things do not look good for the home team and the outlook for the near future is even worse.


Will the last person standing in the president’s Kabuki theatre of cult-populism that passes for economic policy please turn out the lights.


. . . . .I’m just saying…


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